{"id":2672,"date":"2008-10-22T10:25:11","date_gmt":"2008-10-22T10:25:11","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2672"},"modified":"2025-03-27T15:48:44","modified_gmt":"2025-03-27T15:48:44","slug":"uk-rates-big-follow-up-cut-likely-in-november-why-wait","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2672","title":{"rendered":"UK rates: big follow-up cut likely in November – why wait?"},"content":{"rendered":"

A week before the October MPC meeting the MPC-ometer forecast a quarter-point rate cut – at odds with the majority view of no change in a Reuters poll. By the time of the decision the projection had changed to half a point, allowing for the “shock” from escalating financial turmoil – see here<\/a>.<\/p>\n

Minutes of the special MPC meeting on 8 October confirm that recent financial events have resulted in a fundamental shift in the Committee’s thinking. The focus now is on averting the “tail risk” of a severe recession and significant inflation undershoot. In terms of the MPC-ometer, this shift can be captured by “switching on” the shock variable that played a key role in explaining the MPC’s behaviour after the 9\/11 terrorist attacks.<\/p>\n

The model’s forecast will also depend importantly on Friday’s third-quarter GDP report as well as consumer and business surveys to be released around month-end. Assuming a quarterly GDP decline of 0.2% and unchanged survey responses, the -ometer suggests a three-quarter-point cut at the next meeting on 5\/ 6 November. <\/p>\n

As discussed in previous posts, an alternative version of the model assumes the MPC targets interbank interest rates rather than Bank rate. This projects a full-point Bank rate cut in November if three-month LIBOR is above 5.75% at the time of the meeting (fixed at 6.04% today).<\/p>\n

Both versions suggest the MPC will go on hold in December and January if the November forecasts prove correct.<\/p>\n

For comparison, the overnight indexed swap curve currently discounts a 62 basis point cut by 6 November with further falls of 14 bp in December and 17 bp in January.<\/p>\n","protected":false},"excerpt":{"rendered":"

A week before the October MPC meeting the MPC-ometer forecast a quarter-point rate cut – at odds with the majority view of no change in a Reuters poll. By the time of the decision the projection had changed to half a point, allowing for the “shock” from escalating financial turmoil – see here. Minutes of […]<\/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-2672","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\/2672","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=2672"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2672\/revisions"}],"predecessor-version":[{"id":4981,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2672\/revisions\/4981"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2672"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2672"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2672"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}