Market Participants Survey results – June 2022

Expectations for monetary policy from experts in UK rates markets.
Published on 17 June 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 30 May–1 June 2022 with responses being received from 44 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. 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 is your central expectation for Bank Rate after the following MPC meetings (%)? Bank Rate is currently at 1%.

25th percentile

50th percentile

75th percentile

Number of responses

16 June 2022 MPC

1.25

1.25

1.25

44

4 August 2022 MPC

1.50

1.50

1.50

44

15 September 2022 MPC

1.50

1.50

1.75

44

3 November 2022 MPC

1.63

1.75

2.00

43

15 December 2022 MPC

1.75

1.75

2.00

43

2 February 2023 MPC

1.75

2.00

2.25

43

23 March 2023 MPC

1.75

2.00

2.25

42

11 May 2023 MPC

1.56

2.00

2.44

42

One year ahead (June 2023 MPC)

1.50

2.00

2.38

43

Two years ahead (June 2024 MPC)

1.50

1.75

2.00

42

Three years ahead (June 2025 MPC)

1.50

1.75

2.00

41

1b) Is your envisaged level and timing of the peak Bank Rate in this cycle reflected in your answer to part 1a?

Count

Yes

43

No

0

1c) With reference to your answers to part 1a, how would you describe the balance of risks surrounding your expectations for Bank Rate at the following horizons?

Count

Out to the one-year point

At the two-year point

At the three-year point

Risks skewed towards a higher path for Bank Rate

22

11

11

Risks to Bank Rate path broadly balanced

17

21

21

Risks skewed towards a lower path for Bank Rate

4

10

9

1d) And where do you see the level of Bank Rate at which monetary policy is neither expansionary nor contractionary (often referred to as the neutral, natural or equilibrium rate) (%)?

25th percentile

50th percentile

75th percentile

Number of responses

1.50

2.00

2.00

44

1e) Please indicate the percentage chance that you attach to Bank Rate being at the following levels at the upcoming 16 June 2022 meeting (responses should sum to 100%). Bank Rate is currently at 1%. (a)

Factor

Mean weighting (%)

Number of responses

<0.50%

0.1

43

0.50%

0.2

43

0.75%

0.4

43

1.00%

9.2

43

1.25%

75.1

43

1.50%

14.5

43

>1.50%

0.4

43

Footnotes

  • (a) Answers for mean weighting (%) column may not sum to 100% due to rounding.

1f) It was noted in the May MPC Minutes that the respondents to the Market Participants Survey ‘expected a much lower central path for Bank Rate than the market-implied path further ahead’. Please weight the following factors in order of importance in affecting this gap between the Market Participants Survey central path for Bank Rate and the market-implied path. (Responses should sum to a total weight of 100% across these factors.) (a)

Mean weighting (%)

Number of responses

Balance of risks to Bank Rate being skewed to the upside

33.3

41

Global market spillovers

35.6

41

UK market illiquidity/volatility and other technical factors

22.6

41

Other

8.5

41

Footnotes

  • (a) Answers for mean weighting (%) column may not sum to 100% due to rounding.

Question 2: Expectations for balance sheet

2a) In the May 2022 Monetary Policy Report (MPR), it was stated that ‘the Committee will consider beginning the process of selling UK government bonds held in the Asset Purchase Facility… and provide an update at its August meeting’. Reflecting on this, what is your central expectation for the cumulative stock of gilts that the Bank may have actively sold by the following MPC meetings (£ billions)? (a)

25th percentile

50th percentile

75th percentile

Number of responses

15 September 2022 MPC

0

0

3

43

3 November 2022 MPC

0

4

10

43

15 December 2022 MPC

1

9

19

43

2 February 2023 MPC

8

15

22

43

23 March 2023 MPC

11

20

40

43

11 May 2023 MPC

16

30

53

43

One year ahead (June 2023 MPC)

21

35

59

43

Two years ahead (June 2024 MPC)

36

75

118

43

Three years ahead (June 2025 MPC)

49

110

153

43

Footnotes

  • (a) The numbers presented in this table are respondents’ expectations for the cumulative stock of gilts the Bank may have sold in addition to the gilts non reinvested (as set out in the run-off profile published in Results and usage data on the Bank’s website and highlighted to survey respondents).

2b) In the May MPR, it was stated that ‘sales would be expected to be conducted in a gradual and predictable manner so as not to disrupt the functioning of financial markets’. Noting also the run-off profile provided in question 2a, what is the maximum amount of active sales that you think could be conducted in the 12 months following commencement that would not disrupt the functioning of the gilt market (£ billions)?

25th percentile

50th percentile

75th percentile

Number of responses

36

50

100

41

Question 3: Expectations for gilt yields

3a) What is your central expectation for the 10-year gilt yield at the following points in the future (%)? The level of the 10-year gilt yield as of 5pm on 27 May 2022 was 1.92%.

25th percentile

50th percentile

75th percentile

Number of responses

End-June 2022

2.00

2.00

2.23

43

End-September 2022

1.90

2.10

2.31

43

End-December 2022

1.90

2.10

2.40

43

End-March 2023

1.75

2.00

2.50

43

End-June 2023

1.70

2.00

2.50

41

3b) What impact (if any) do you think expectations for reductions in the stock of gilt purchases have had on the current level of the 10-year gilt yield (in basis points)? (a)

25th percentile

50th percentile

75th percentile

Number of responses

10-year gilt yield

5

10

20

36

30-year gilt yield

10

10

18

35

Footnotes

  • (a) A positive number represents an upwards shift in gilt yields in basis points (and vice versa for negative numbers).

Question 4: Expectations for exchange rates

4a) What is your central expectation for GBPUSD at the following points in the future? The level of GBPUSD as of 5pm on 27 May 2022 was 1.2612.

25th percentile

50th percentile

75th percentile

Number of responses

End-June 2022

1.2500

1.2500

1.2600

39

End-December 2022

1.2075

1.2300

1.2700

40

End-June 2023

1.2000

1.2500

1.2950

38

4b) What is your central expectation for EURGBP at the following points in the future? The level of EURGBP as of 5pm on 27 May 2022 was 0.8490.

25th percentile

50th percentile

75th percentile

Number of responses

End-June 2022

0.8500

0.8500

0.8600

39

End-December 2022

0.8500

0.8600

0.8700

40

End-June 2023

0.8500

0.8700

0.8800

38

Question 5: Expectations for inflation

5a) Please provide your central expectations for annual consumer prices index (CPI) inflation after each of the following time intervals. For reference, the most recent CPI print, for April, was 9%.

25th percentile

50th percentile

75th percentile

Number of responses

Six months ahead

8.00

9.00

10.00

43

One year ahead

4.00

5.00

6.00

43

Two years ahead

2.00

2.50

3.88

42

Three years ahead

2.00

2.00

3.00

40

Five years ahead

2.00

2.00

2.50

39

5b) With reference to your answers to part 5a, how would you describe the balance of risks surrounding your expectations for CPI at the following horizons?

Count

Out to the one-year point

At the two-year point

At the three-year point

Risks skewed towards a higher path for CPI

21

13

7

Risks to CPI path broadly balanced

15

16

23

Risks skewed towards a lower path for CPI

5

11

9

5c) In the Minutes of the May 2022 meeting, the MPC observed that ‘medium-term inflation compensation measures… had remained above their levels at the time of the February Report and 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 of 100% across the four options.) (a)

Mean weighting (%)

Number of responses

Fundamental: elevated central expectations for inflation

32.5

39

Fundamental: the balance of risks on inflation being to the upside

29.4

39

Technical: supply/demand imbalances in the inflation compensation market or other technical factors

35.2

39

Other

2.8

39

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 by applying the percentile proportional to the distance between them. 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 17 June 2022

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