Time: 5.30pm – 7pm | Location: Bank of England
Minutes
Item 1: Welcome
The Governor began the meeting by thanking attendees for joining and reminding participants of the purpose of these meetings. The Governor made clear that the MPC would be in listening mode, and that the meeting would be conducted in accordance with relevant competition and conduct laws, as per the terms of reference.
Item 2: International developments
Market participants began by outlining their views on the key risks in major developed markets outside the UK. These included the potential for inflation to surprise and the possible consequences for global interest rates. Market participants also discussed the recent growth in equity valuations driven by AI and whether they were sustainable or exhibiting bubble-like behaviour, with implications for capital expenditure and consumer spending. There were a range of views on the impact of tariffs, trade policy uncertainty and trade diversion on the outlook for global growth and inflation.
The discussion also covered the potential implications of these risks for the UK economy. Market participants noted the potential for movements in global yields to spillover to UK bond markets. A sharp fall in equity valuations or increase in trade tensions would affect global activity and have consequences for the domestic outlook.
Item 3: Domestic developments
Market participants shared their reactions to the November MPC meeting, the outcome of which was generally as expected and led to adjustments to market pricing for the near-term meetings against a little-changed profile of market rates overall. Reflections on the changes to the MPC’s communications package in November were largely positive. There was agreement that the innovation of individual MPC member paragraphs to the minutes had added clarity around their different perspectives and reaction function. The links drawn to the boxes in the Monetary Policy Report were likewise well received. The treatment of the scenarios was also discussed.
Market participants expressed a range of opinions on the macroeconomic outlook. For some the inflation outlook was seen as turning more benign, whilst others put more weight on the possibility of ongoing persistence. This had implications for market participants’ perceptions of the prevailing level of policy restrictiveness and the neutral rate. The contrasting signals from household and market-based measures of inflation were also discussed. There was more agreement on the likelihood of growth and employment to weaken, although this view was held to differing degrees of conviction. The upcoming Budget was widely viewed by market participants as the key near term focus for financial markets. The potential implications for rates and currency markets and the extent to which the likely outcomes were already factored into market pricing were discussed amongst market participants.
Attendees
Market Participants Group (MPG) members
Andy Chaytor – Nomura
Stephen Cohen – BlackRock
Chris Rokos – Rokos Capital Management
Angel Ubide – Citadel LLP
Karen Ward – JP Morgan Asset Management
James Watson – Balyasny Asset Management
Monetary Policy Committee (MPC) members
Andrew Bailey
Sarah Breeden
Megan Greene
Clare Lombardelli
Catherine L Mann
Huw Pill
Dave Ramsden
Alan Taylor
Bank of England staff
Geoff Coppins
Sean Maloney
Arif Merali
Andrea Rosen
Vicky Saporta
Fergal Shortall