{"id":2513,"date":"2008-02-20T11:47:54","date_gmt":"2008-02-20T11:47:54","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2513"},"modified":"2025-03-27T15:48:34","modified_gmt":"2025-03-27T15:48:34","slug":"dovish-mpc-signals-despite-inflation-risks","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2513","title":{"rendered":"Dovish MPC signals despite inflation risks"},"content":{"rendered":"<p>Last week&rsquo;s <em>Inflation Report<\/em> was regarded as slightly hawkish but I was struck by the forecast based on unchanged interest rates, showing an annual CPI increase of just 1.77% in the first quarter of 2010. Despite two rate cuts and a sharp fall in sterling, this was only 3 bp higher than the two-year-ahead forecast in November&rsquo;s <em>Report<\/em> and represents the second largest shortfall from target in the MPC&rsquo;s history. <\/p>\n<p>The message was reinforced by today&rsquo;s minutes of the February meeting, showing an 8-1 vote in favour of the quarter-point cut, with David Blanchflower dissenting in favour of a 50 bp move. This is considerably more dovish than the 5-4 split suggested by both my MPC-ometer and the <em>Sunday Times<\/em> Shadow MPC. <\/p>\n<p>In light of this information, and ongoing deterioration in credit markets, I now expect an early further cut in rates despite the prospect of a surge in CPI inflation to 3% by the third quarter of 2008. I will be guided by the MPC-ometer but a move seems likely before the next <em>Inflation Report<\/em> in May. <\/p>\n<p>My personal view is that&nbsp;rates should be held at 5.25% until inflation is over its hump. The MPC&rsquo;s mandate is to meet the 2% target &ldquo;at all times&rdquo; not just&nbsp;at the two-year horizon. It is true that its policy actions have a negligible effect on near-term inflation prospects but they are relevant one year ahead, when the <em>Inflation Report<\/em> suggests the annual CPI increase will still be well above target, at 2.29%. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Last week&rsquo;s Inflation Report was regarded as slightly hawkish but I was struck by the forecast based on unchanged interest rates, showing an annual CPI increase of just 1.77% in the first quarter of 2010. Despite two rate cuts and a sharp fall in sterling, this was only 3 bp higher than the two-year-ahead forecast [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2513","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2513","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2513"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2513\/revisions"}],"predecessor-version":[{"id":4822,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2513\/revisions\/4822"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2513"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2513"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2513"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}