Carney Begins Final Countdown to Bank of England Data Overload

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Mark Carney
Bank of England Governor Mark Carney. Photographer: Simon Dawson/Bloomberg

Brace yourself.

Mark Carney is about to unleash a flood of data in one fell swoop in what will be an unprecedented move for a major central bank. Instead of staggering releases over two weeks, the Bank of England will on Aug. 6 simultaneously publish its policy decision, minutes of the meeting, officials’ votes and new forecasts covering every facet of the economy.

The countdown to what’s been dubbed “Super Thursday” starts Wednesday, when Carney and the Monetary Policy Committee begin discussions building up to the event. The shotgun format means a deluge of information for economists and investors to wade through as they seek insights at a time Carney has said the era of record-low U.K. interest rates is approaching its end.

The synchronized publication of so many monetary-policy releases is a first for a Group of Seven central bank and will allow officials to immediately explain their thinking. Previously, BOE watchers had to initially make do with a piecemeal unveiling of the picture as information was drip fed.

“It’s obviously going to be a massive amount of information and data overload to get your head around,” said Alan Clarke, an economist at Scotiabank in London, who’s been analyzing the BOE for 10 years. “It’s going to be a hard day.”

August Frenzy

It’s not just the glut of data that’s capturing the attention.

While the central bank’s forecasts are closely scrutinized at each quarterly update -- known as the Inflation Report -- this time the numbers have taken on additional weight. They coincide with a shift in thinking at the BOE about when to increase the key rate from 0.5 percent.

When that does happen, it will mark the start of the first tightening cycle in the U.K. in close to a decade. Morgan Stanley are among banks forecasting that two of the nine MPC members will vote for a rate hike next week.

For August’s decision, officials will gather on Wednesday for their “Pre-MPC” meeting to be briefed by staff. They will vote on Aug. 5 and announce their decision at noon in London the following day. Carney will start a press conference 45 minutes later.

Other central banks, such as the Federal Reserve, often release statements alongside policy decisions, though minutes are usually delayed. The BOE is the first to opt for the all-in-one-go format.

With U.K. policy having been in stasis for three years -- and interest rates unchanged for more than six -- starting the new communication format now gives markets time to acclimatize before rate increases begin. Investors aren’t fully pricing in a tightening until May 2016.

Brutal Filters

The torrent increases the pressure on economists and analysts to quickly decipher what the MPC is saying about the outlook and tell traders hungry for information.

For BOE watchers, the key will be to focus on the most important information -- the policy decision, votes and inflation outlook -- and passing that to colleagues on the trading floor via internal “squawk boxes” as quickly as possible.

“There’s more information and we’ll need to pass that filter over it more brutally,” said Philip Rush, an economist at Nomura International Plc in London.

With U.K. policy having been in stasis for three years -- and interest rates unchanged for more than six -- starting the new communication format now gives markets time to acclimatize before rate increases begin
With U.K. policy having been in stasis for three years -- and interest rates unchanged for more than six -- starting the new communication format now gives markets time to acclimatize before rate increases begin
Simon Dawson/Bloomberg

Economist Relief

There is one relief for economists. The new 45-minute gap between the Inflation Report publication and Carney’s press conference gives them time to digest its contents. That may also benefit the governor, according to Ross Walker, an economist at Royal Bank of Scotland Group Plc in London.

“Carney will have time between the announcements and the press conference to observe a market reaction and get an early feel on how it should be interpreted,” he said. “If something doesn’t look right, or there’s a bit of an overreaction, they have an opportunity to correct that.”

The old lagged-release format would sometimes whipsaw investors, who took one message from the report -- the MPC’s central view -- and another from the minutes a week later.

With Carney condensing it all into one day to reduce speculation between publications, the instantaneous unveiling means investors will have all the information in hand within seconds. That could lead to bigger market fluctuations around the release, though less longer-term volatility, Rush said.

“Ninety percent of what the market moves on, you’ll be able to pick that up in 10 seconds,” he said. “So people will invest off that with more conviction and you could get bigger moves as they won’t worry that next week it might all come back.”

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