Mark Carney, the Governor of the Bank of England gave a speech on Guidance, Contingencies and Brexit at the Society of Professional Economists on the 24th May 2018. Essentially, the speech said the Bank was well prepared for any “potential path” of Brexit. What it didn’t mention was the rapidly expanding balance sheet.
The Monetary Policy Committee of the Bank of England meets on Thursday, May 10 to decide the direction of interest rates.
Following a weak UK Q1 2018 GDP growth of only 0.1%, the slowest since Q4 2012 (read here) and inflation falling from 2.7% in February to 2.5% in March (against a Bank of England target of 2%), the market is now pricing in a 17% of a rate rise in May. The market had factored in a 100% chance of a hike just a few weeks ago.
UK 10-year bond yields fell 5bps during the week. The 10-year bond now yields 1.4% (up 0.32% over the past year)