Banking

Market Participants Survey results – August 2023


Overview

This survey forms part of the Bank’s quantitative market intelligence gathering. It is formulated by Bank of England staff and enhances policymakers’ understanding of market expectations. The questions involve topics that are widely discussed in the public domain, and never presume any particular policy action. Monetary Policy Committee (MPC) members are not involved in the survey’s design.

Survey respondents originate from a broad set of market participant firms, selected by the Bank based on a number of criteria, including: (i) relevant market activity in UK rates or money markets; (ii) expertise in UK rates markets and/or UK monetary policy; (iii) willingness to participate regularly in the survey and in the Bank’s market intelligence activity; and (iv) membership of one of the Bank’s external market committees.

Please contact [email protected] for queries or for further information.

Survey results

The survey was open from 20–21 July 2023 with responses being received from 62 market participants. For most questions, median responses across participants, along with the 25th and 75th percentiles, are reported.footnote [1] For questions that ask respondents to weight different factors or assign probabilities to specific outcomes, the mean weightings and probabilities are reported. For questions that ask respondents to select one option from a given set of possibilities – the respondent count against each option is reported.

Question 1: Expectations for Bank Rate

1a) What do you see as the most likely level of Bank Rate after the following MPC meetings? Bank Rate is currently at 5.00%. (a)

25th percentile

50th percentile

75th percentile

Number of responses

3 August 2023 MPC

5.25

5.25

5.50

58

21 September 2023 MPC

5.50

5.50

5.75

58

2 November 2023 MPC

5.50

5.75

5.75

58

14 December 2023 MPC

5.50

5.75

5.94

58

1 February 2024 MPC

5.50

5.75

5.75

58

21 March 2024 MPC

5.50

5.63

5.94

58

9 May 2024 MPC

5.25

5.50

5.75

58

20 June 2024 MPC

5.00

5.50

5.75

58

One year ahead (August 2024 MPC)

4.75

5.25

5.50

57

End-2024 Q3

4.50

5.00

5.50

58

End-2024 Q4

4.00

4.50

5.00

57

End-2025 Q1

3.75

4.25

4.75

57

End-2025 Q3

3.00

4.00

4.50

56

End-2026 Q3

3.00

3.50

4.00

55

1d) In the June MPC minutes, the MPC said that ‘if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required’. Please weight the following factors (%) in terms of their importance in informing your perceptions about the prospects for further tightening. Responses should sum to a total of 100%. (a)

Mean weighting (%)

Number of responses

Tightness of labour market conditions

19.4

58

Wages growth

27.1

58

Services price inflation

26.3

58

Other aspects of headline inflation

10.7

58

Survey and market-based measures of inflation expectations

8.6

58

The MPC’s communications on the inflation outlook

7.2

58

Other

0.8

58

1e) At this point in time, what probability do you attach to an initial rate cut of any size occurring within the following time frames? Responses should sum to a total of 100%. (a)

Mean probability (%)

Number of responses

Between now and the end of 2023 Q4

6.0

58

From the start of 2024 Q1 to the end of 2024 Q2

36.5

58

After 2024 Q2

57.5

58

1f) With reference to your answers to question 1a on most likely levels for Bank Rate, how would you describe the balance of risks surrounding your expectations for Bank Rate at the following horizons?

Count

Between now and the one-year point

At the two-year point

At the three-year point

Risks skewed towards a higher path for Bank Rate

30

8

8

Risks to Bank Rate path broadly balanced

20

26

25

Risks skewed towards a lower path for Bank Rate

8

24

24

Question 2: Macroeconomic outlook

2a) Please provide the annual rate of CPI inflation – conditioned on your Bank Rate expectations (question 1a) – you see as most likely at each of the following time horizons. For reference, the most recent CPI print for June was 7.9%.

25th percentile

50th percentile

75th percentile

Number of responses

End-2023 Q3

6.30

6.50

6.80

54

End-2023 Q4

4.30

4.65

5.00

54

End-2024 Q1

3.30

3.80

4.40

53

End-2024 Q2

2.00

3.00

4.00

53

One year ahead

2.40

3.00

3.28

54

Two years ahead

2.00

2.30

3.00

53

Three years ahead

2.00

2.20

2.50

53

Five years ahead

2.00

2.00

2.50

50

2bi) Please assign probabilities to the following rates of annual CPI inflation three years ahead. Responses should sum to a total weight of 100%. (a)

Mean probability (%)

Number of responses

<=1.00%

3.4

53

1.01%–1.40%

4.9

53

1.41%–1.80%

9.8

53

1.81%–2.20%

23.6

53

2.21%–2.60%

25.3

53

2.61%–3.00%

15.2

53

>3.00%

17.7

53

2c) The May 2023 Monetary Policy Report (MPR) set out the MPC’s projections for annual UK GDP growth as: 2023 +0.25%, 2024 +0.75%, 2025 +0.75%. How does your most likely profile for UK GDP growth differ in percentage points from that of the assessment in the May MPR – conditioned on your Bank Rate expectations (question 1a). For example, an answer of +0.1% implies you expect GDP growth to be 0.1% higher than the May MPR projection, an answer of 0.0% implies your expectation aligns with the May MPR and an answer of -0.1% implies you expect GDP growth to be 0.1% lower than the May MPR. 

Count

25th percentile

50th percentile

75th percentile

Number of responses

+/- % difference versus MPR: 2023

-0.10

0.00

0.10

49

+/- % difference versus MPR: 2024

-0.50

-0.25

0.00

49

+/- % difference versus MPR: 2025

-0.21

0.00

0.41

48

Question 3: Expectations for the Bank’s balance sheet and gilt yields

3b) What do you see is the most likely level for the 10-year gilt yield at the following points in the future (%)? Current 10-year gilt yield is 4.21% as of 5pm on 19 July 2023.

25th percentile

50th percentile

75th percentile

Number of responses

End-September 2023

4.00

4.20

4.40

54

End-December 2023

3.81

4.00

4.50

54

End-March 2024

3.50

3.95

4.30

53

End-June 2024

3.40

3.75

4.00

53

End-September 2024

3.25

3.70

4.00

53

Question 4: Expectations for exchange rates

4a) What do you see is the most likely level for GBPUSD at the following points in the future? The level of GBPUSD as of 5pm on 19 July 2023 was 1.2894.

25th percentile

50th percentile

75th percentile

Number of responses

End-December 2023

1.2600

1.2800

1.3000

47

End-June 2024

1.2500

1.2600

1.3000

47

End-December 2024

1.2200

1.2500

1.3000

47

4b) What do you see is the most likely level for EURGBP at the following points in the future? The level of EURGBP as of 5pm on 19 July 2023 was 0.8673.

25th percentile

50th percentile

75th percentile

Number of responses

End-December 2023

0.8500

0.8698

0.8750

48

End-June 2024

0.8600

0.8750

0.8800

48

End-December 2024

0.8500

0.8800

0.8950

47



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