This month’s Bank of England’s MPC (Monetary Policy Committee) meeting concludes today, with the policy announcement made at midday. Under the new forward guidance framework, there is little prospect of any change in policy. If, as we expect, the committee follows last month’s practice, an accompanying statement is also unlikely.
However, the minutes in two weeks’ time will be read closely for the MPC’s latest thinking over the pace of recovery and what this may mean for productivity and the unemployment rate. Amid growing signs of recovery, recent comments from MPC members suggest there is no need for further policy stimulus (i.e. QE), but there remains broad support for forward guidance. Despite yesterday’s weak industrial activity report, Q3 GDP is expected to be as firm as, if not stronger than, Q2’s 0.7% reading, the MPC may hint at possible upward revisions to their GDP forecasts in November’s Inflation Report. In the US, amidst the on-going partial government shutdown, the economic calendar continues to be severly impacted.
Today’s weekly initial claims release is one of the few releases that currently remains unaffected. Over the past few weeks, the number of initial claims has been on a downward trajectory (allowing for the distortions to the data due to technical issues). We forecast claims holding close to last week’s level, which would be consistent with the labour market starting October on a positive note, although the impact of the shutdown on the numbers is uncertain. However, confirmation of this from the key labour market report looks likely to be delayed by the continued shutdown.