My MPC-ometer model is forecasting an "average interest rate recommendation" of -13 bp at this week’s MPC meeting – just beyond the 12.5 bp threshold, suggesting a 5-4 vote for a 25 bp cut. <\/p>\n
A week ago, the model was pointing to a 6-3 majority for unchanged rates. The swing factors over the last couple of days have been weak February consumer confidence results and a further deterioration in credit markets. <\/p>\n
One missing input is the purchasing managers’ services survey, released on Wednesday. Any weakness relative to last month’s results would obviously boost the chances of a cut. <\/p>\n
This could be one of those occasions (such as June last year) when the model is a month early. Its historical performance in backtests is 90%; of the 10% of misses, half have been due to the model predicting a change one month in advance. <\/p>\n
Another cut this month would sit uneasily with MPC communications indicating concern that the coming rise in inflation will further destabilise expectations. However, MPC members have also stressed the risks posed by tighter credit conditions. Credit spreads have widened significantly further since their last meeting, in some cases reaching the highest level since before the early 1990s recession. Three-month LIBOR has also been firming – it was set at 5.74% on Friday, far above Bank rate of 5.25%. <\/p>\n
For comparison, the Sunday Times<\/em> Shadow MPC voted 7-2 to leave rates unchanged this month. <\/p>\n","protected":false},"excerpt":{"rendered":" My MPC-ometer model is forecasting an "average interest rate recommendation" of -13 bp at this week’s MPC meeting – just beyond the 12.5 bp threshold, suggesting a 5-4 vote for a 25 bp cut. A week ago, the model was pointing to a 6-3 majority for unchanged rates. The swing factors over the last couple […]<\/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-2547","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\/2547","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=2547"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2547\/revisions"}],"predecessor-version":[{"id":4856,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2547\/revisions\/4856"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2547"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2547"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2547"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}