Market Participants Survey results – February 2022

Expectations for monetary policy from experts in UK rates markets.
Published on 04 February 2022

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 MarketParticipantsSurvey@bankofengland.co.uk for queries or for further information.

Survey results

The survey was open from 20−21 January 2022 with responses being received from 30 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 or rank different factors, the mean weighting or ranking is reported.

Question 1: Expectations for Bank Rate

1a) What is your central expectation for Bank Rate after the following MPC meetings (%)? Bank Rate is currently at 0.25%.

25th Percentile

50th Percentile

75th Percentile

Number of responses

3 Feb. 2022 MPC

0.50

0.50

0.50

30

17 Mar. 2022 MPC

0.50

0.50

0.50

30

5 May 2022 MPC

0.75

0.75

0.75

29

16 June 2022 MPC

0.75

0.75

0.75

30

One year ahead (Feb. 2023 MPC)

1.00

1.13

1.25

30

Two years ahead (Feb. 2024 MPC)

1.25

1.50

1.50

29

Three years ahead (Feb. 2025 MPC)

1.00

1.50

2.00

29

1b) With reference to your answers to 1a, how would you describe the balance of risks surrounding your expectations for Bank Rate?

Responses

Count

Risks skewed towards a higher path for Bank Rate

18

Risks skewed towards a lower path for Bank Rate

3

Risks to Bank Rate path broadly balanced

9

1c) With reference to your answers to 1a, how would you describe your degree of conviction? 1 = lowest degree of conviction; 5 = highest degree of conviction

Responses

Count

1

0

2

3

3

15

4

10

5

2

1d) What is your expectation for the peak level for Bank Rate in this cycle (%)?

25th Percentile

50th Percentile

75th Percentile

Number of responses

1.25

1.50

2.00

29

Question 2: Expectations for balance sheet

2a) What is your central expectation for the actual stock of gilts held by the Bank’s Asset Purchase Facility (APF) after the following MPC meetings (£ billions)? The current stock of gilts is £875 billion.

25th Percentile

50th Percentile

75th Percentile

Number of responses

3 Feb. 2022 MPC

875

875

875

30

17 Mar. 2022 MPC

847

850

869

30

5 May 2022 MPC

847

850

850

30

16 June 2022 MPC

846

848

850

30

One year ahead (Feb. 2023 MPC)

800

825

840

29

Two years ahead (Feb. 2024 MPC)

720

775

800

29

Three years ahead (Feb. 2025 MPC)

650

713

751

28

2b) In the August 2021 Monetary Policy Report, it was stated that ‘The Committee’s preference is to use Bank Rate as its active instrument in most circumstances’. It was also stated that ‘the MPC intends to begin to reduce the stock of purchased assets when Bank Rate has reached 0.5%, if appropriate given the economic circumstances, by ceasing reinvestments of maturing UK government bonds’. Reflecting on this guidance and noting your answers in Question 1, after which MPC meeting would you first expect APF gilt reinvestments to be ceased? (a)

25th Percentile

50th Percentile

75th Percentile

Number of responses

February 2022

February 2022

February 2022

30

Footnotes

  • (a) Respondents were asked to enter a ‘0’ if they did not foresee cessation of reinvestments.

2c) In the August 2021 Monetary Policy Report, it was also stated that ‘The MPC will consider actively selling some of the stock of purchased assets only once Bank Rate has risen to at least 1% …and depending on economic circumstances at the time’. Reflecting on this guidance and noting your answers in Question 1, after which MPC meeting would you first expect active sales of APF gilts? (a)

25th Percentile

50th Percentile

75th Percentile

Number of responses

November 2022

February 2023

Never

30

Footnotes

  • (a) Respondents were asked to enter a ‘0’ if they did not foresee active gilt sales.

2d) Reflecting on your answer to the above, what would be your central expectation for the total cumulative value of gilts (£ billions) that the MPC may have actively sold after each of the following time intervals? Please exclude gilts not reinvested from your forecasts.

25th Percentile

50th Percentile

75th Percentile

Number of responses

Six months ahead

0

0

0

30

One year ahead

0

0

25

30

Two years ahead

0

25

70

29

Three years ahead

0

50

110

29

Five years ahead

0

100

200

28

2e) What is your central expectation for the actual stock of corporate bonds held by the APF after the following MPC meetings (£ billions)? As of close of business 12 January 2022, the outstanding stock of corporate bonds was £19.8 billion, with the MPC targeting a return to £20 billion as part of the current Corporate Bond Purchase Scheme reinvestment round.

25th Percentile

50th Percentile

75th Percentile

Number of responses

3 Feb. 2022 MPC

19.8

20.0

20.0

28

17 Mar. 2022 MPC

19.8

20.0

20.0

28

5 May 2022 MPC

19.8

20.0

20.0

28

16 June 2022 MPC

18.5

20.0

20.0

27

One year ahead (Feb. 2023 MPC)

15.0

18.0

20.0

27

Two years ahead (Feb. 2024 MPC)

10.0

15.0

20.0

27

Three years ahead (Feb. 2025 MPC)

5.0

12.5

20.0

26

Question 3: Expectations for gilt yields and exchange rates

3a) What is your central expectation for the 10-year gilt yield at the following points in the future (%)? Current 10-year gilt yield is 1.26% at 5pm on 19 January 2022.

25th Percentile

50th Percentile

75th Percentile

Number of responses

End-Mar. 2022

1.25

1.30

1.35

28

End-June 2022

1.35

1.50

1.50

29

End-Sep. 2022

1.40

1.50

1.70

29

End-Dec. 2022

1.46

1.60

1.96

30

End-Mar. 2023

1.50

1.75

2.06

28

3b) What is your central expectation for GBPUSD at the following points in the future? The level of GBPUSD as of 5pm on 19 January 2022 was 1.3625.

25th Percentile

50th Percentile

75th Percentile

Number of responses

End-June 2022

1.3500

1.3500

1.3619

26

End-Dec. 2022

1.3300

1.3500

1.3619

26

End-June 2023

1.3000

1.3500

1.3619

26

3c) What is your central expectation for EURGBP at the following points in the future? The level of EURGBP as of 5pm on 19 January 2022 was 0.8327.

25th Percentile

50th Percentile

75th Percentile

Number of responses

End-June 2022

0.8213

0.8300

0.8337

26

End-Dec. 2022

0.8200

0.8263

0.8350

26

End-June 2023

0.8125

0.8314

0.8400

26

Question 4: Expectations for inflation

4a) Please provide your central expectations for annual CPI inflation after each of the following time intervals. For reference, the most recent CPI print, for December, was 5.4%.

25th Percentile

50th Percentile

75th Percentile

Number of responses

Six months ahead

4.50

5.50

6.00

28

One year ahead

3.00

3.50

4.05

28

Two years ahead

2.00

2.50

2.56

28

Three years ahead

2.00

2.00

2.38

27

Five years ahead

2.00

2.00

2.00

27

4b) In the Minutes of the December 2021 meeting, the MPC observed that medium-term UK inflation compensation measures in financial markets had remained above their average levels of the past decade. Please weight the following factors in order of importance in affecting the current level of medium-term UK inflation compensation measures (responses should sum to a total weight of 100% across the four factors). (a)

Factor

Mean weighting (%)

Number of responses

Elevated central expectations for inflation

34.1

28

The balance of risks on inflation being to the upside

26.3

28

Supply/demand imbalances in the inflation compensation market or other technical factors

35.4

28

Other

4.3

28

Footnotes

  • (a) Answers for Mean weighting (%) column may not sum to 100% due to rounding.
  1. Throughout, the Xth percentile is calculated by ranking the survey responses in ascending order and reporting the response which is ranked in position k, where k is (X/100)*(sample size – 1) + 1. For numeric answers, where k is not an integer (ie this position lies between two responses), the result is interpolated. Discontinuous answers, such as policy meeting dates, are not interpolated. Instead, the first response which covers at least X% of the sample is reported.

This page was last updated 20 April 2022

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