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17 Mar 2016
UK: After Budget its BoE today – TDS
Research Team at TDS, suggests that today the Bank of England’s MPC meets, and they & markets don’t expect much – another unanimous vote to do nothing.
Key Quotes
“While Jan Vlieghe said only two weeks ago that he’d consider a rate cut if data continued to deteriorate, we don’t think the Feb PMIs were enough to swing him into that camp – he’ll likely want to wait for hard data. But we’ll still look for the MPC’s assessment of the causes of the weak survey data – in particular if they express any fears over the impact of the Brexit vote on growth.
Yesterday’s UK budget ended up being fairly un-controversial, as widely expected. A new sugar tax stole the headlines, distracting from what was probably the most important development of the day: the OBR’s downward revision to trend growth, and the fiscal challenges that it implies. After “gifting” the government a £27bn windfall in its November Autumn Statement, the OBR took back that and then some, leaving the government with £52bn less room by 2020.
Consequently, the debt-to-GDP ratio is now expected to remain higher over the coming years, with some opaque and ‘sudden’ revenue generators (and a few unspecified cost cuts) pushing the fiscal balance into surplus by 2019/20 as previously planned. The budget introduced stimulus measures for small businesses and savers (especially those <40) while continuing to crack down on big corporate tax evasion.
The big policy announcements include a cut in the capital gains tax from 28% to 20%, a reduction in corporate taxes from 20% to 17%, increase in the tax-free and the upper personal tax bracket thresholds, a new sugar tax, infrastructure spending, and changes to the child education system. Beer, spirit, and fuel taxes will be frozen, while tobacco taxes will rise, implying little impact to the inflation outlook.”
Key Quotes
“While Jan Vlieghe said only two weeks ago that he’d consider a rate cut if data continued to deteriorate, we don’t think the Feb PMIs were enough to swing him into that camp – he’ll likely want to wait for hard data. But we’ll still look for the MPC’s assessment of the causes of the weak survey data – in particular if they express any fears over the impact of the Brexit vote on growth.
Yesterday’s UK budget ended up being fairly un-controversial, as widely expected. A new sugar tax stole the headlines, distracting from what was probably the most important development of the day: the OBR’s downward revision to trend growth, and the fiscal challenges that it implies. After “gifting” the government a £27bn windfall in its November Autumn Statement, the OBR took back that and then some, leaving the government with £52bn less room by 2020.
Consequently, the debt-to-GDP ratio is now expected to remain higher over the coming years, with some opaque and ‘sudden’ revenue generators (and a few unspecified cost cuts) pushing the fiscal balance into surplus by 2019/20 as previously planned. The budget introduced stimulus measures for small businesses and savers (especially those <40) while continuing to crack down on big corporate tax evasion.
The big policy announcements include a cut in the capital gains tax from 28% to 20%, a reduction in corporate taxes from 20% to 17%, increase in the tax-free and the upper personal tax bracket thresholds, a new sugar tax, infrastructure spending, and changes to the child education system. Beer, spirit, and fuel taxes will be frozen, while tobacco taxes will rise, implying little impact to the inflation outlook.”