At their October meeting, the Bank of England (BoE) Monetary Policy Committee (MPC) voted 7-2 to hike the Bank Rate by 25bps to 0.50%, as widely expected, in the first rate hike in over a decade. The language used in both the statement and press conference following the release of the decision was interpreted as dovish by the market, as future hikes were said to be "limited and gradual".
The European Central Bank (ECB) announced it will reduce asset purchases from €60bn to €30bn for nine-months from January 2018, mainly through less sovereign bond buying, while policy rates will remain low for "an extended period of time, and well past the horizon of the net asset purchases".
At their October Monetary Policy Meeting (MPM), the Bank of Japan voted 8-1 to maintain their current monetary policy, including targets for both short and long-term interest rates, as widely expected. As with the last meeting, the one dissenting vote came from the newest BoJ board member Mr. Kataoka. In their quarterly outlook report, the BoJ lowered their near term core inflation outlook, to 0.8% for 2017 (down 0.ppt) and to 1.4% for 2018 (down 0.1ppt).
At their February Monetary Policy Committee (MPC) meeting, the Bank of England (BoE) unanimously voted to leave interest rates unchanged, and made no alterations to their asset purchase programs. The Bank also revised higher their growth forecasts, but left the inflation outlook largely unchanged.
US Core CPI month over month printed above consensus at 0.349% last week. Core CPI for December was revised down due to seasonal factors.
ECB President Draghi noted rates will not rise this year, but did not comment on the impact of recent EUR strength on the growth or inflation outlook. The absent of the latter comment prompted a hawkish market response with market pricing implying a positive deposit rate (currently -40bps) by 2019. We think market pricing is misplaced given our subdued inflation outlook.