Market Participants Survey results – March 2022

Expectations for monetary policy from experts in UK rates markets.
Published on 18 March 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 3−4 March 2022 with responses being received from 31 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 0.50%.

25th Percentile

50th Percentile

75th Percentile

Number of responses

17 Mar 2022 MPC

0.75

0.75

0.75

31

5 May 2022 MPC

1.00

1.00

1.00

31

16 Jun 2022 MPC

1.00

1.00

1.00

29

4 Aug 2022 MPC

1.00

1.25

1.25

30

15 Sep 2022 MPC

1.00

1.25

1.25

30

3 Nov 2022 MPC

1.25

1.38

1.50

30

15 Dec 2022 MPC

1.25

1.50

1.50

29

2 Feb 2023 MPC

1.50

1.50

1.50

30

One year ahead (Mar 2023 MPC)

1.50

1.50

1.75

31

Two years ahead (Mar 2024 MPC)

1.25

1.75

2.00

30

Three years ahead (Mar 2025 MPC)

1.31

1.88

2.00

30

1b) If not already reflected in your responses to part 1a, what do you see as the peak level for Bank Rate in this cycle? (a)

25th Percentile

50th Percentile

75th Percentile

Number of responses

1.50

2.00

2.50

31

Footnotes

  • (a) In line with the guidance provided, in the case of blank responses, the peak rate was inferred from the profiles provided in respondents’ answers to part 1a.

1c) 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

1.25

1.75

2.00

28

1d) Please indicate the percentage chance that you attach to Bank Rate being at the following levels at the upcoming 17 March 2022 meeting (responses should sum to 100%). Bank Rate is currently at 0.5%. (a)

Mean weighting (%)

Number of responses

<0.25%

0.8

29

0.25%

2.9

29

0.50%

13.8

29

0.75%

69.4

29

1.00%

12.5

29

>1.00%

0.6

29

Footnotes

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

1e) 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

16

12

9

Risks to Bank Rate path broadly balanced

10

14

16

Risks skewed towards a lower path for Bank Rate

4

4

5

Question 2: Expectations for balance sheet

2a) At the February 2022 MPC meeting, the Committee voted to begin to reduce the stock of UK government bond purchases, financed by the issuance of central bank reserves, by ceasing to reinvest maturing assets. In the Monetary Policy Report it was also stated that ‘The Committee reaffirms that it will consider beginning the process of actively selling UK government bonds only once Bank Rate has risen to at least 1%, depending on economic circumstances at the time’. Reflecting on this, what is your central expectation for the cumulative stock of gilts that the Bank may have actively sold after the following MPC meetings (£ billions)? (a)

25th Percentile

50th Percentile

75th Percentile

Number of responses

17 Mar 2022 MPC

0

0

0

31

5 May 2022 MPC

0

0

0

31

16 Jun 2022 MPC

0

0

2

31

4 Aug 2022 MPC

0

0

10

31

15 Sep 2022 MPC

0

0

17

31

3 Nov 2022 MPC

0

10

28

31

15 Dec 2022 MPC

0

18

36

31

2 Feb 2023 MPC

6

25

45

31

One year ahead (Mar 2023 MPC)

19

35

60

31

Two years ahead (Mar 2024 MPC)

45

70

123

31

Three years ahead (Mar 2025 MPC)

68

113

187

31

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 not re-invested (as set out in the run-off profile published in Results and usage data on the Bank’s website and highlighted to survey respondents).

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 2 March 2022 was 1.255%.

25th Percentile

50th Percentile

75th Percentile

Number of responses

End-Mar 2022

1.25

1.30

1.40

29

End-Jun 2022

1.45

1.50

1.58

30

End-Sep 2022

1.50

1.65

1.75

30

End-Dec 2022

1.51

1.78

2.00

30

End-Mar 2023

1.60

1.75

2.10

29

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 and 30-year gilt yield (basis points)? (a)

25th Percentile

50th Percentile

75th Percentile

Number of responses

10-year gilt yield

0

9

15

27

30-year gilt yield

3

10

20

27

Footnotes

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

3c) What is your central expectation for total gilt issuance by the Debt Management Office (DMO) over the upcoming fiscal year (2022/23) (£ billions)?

25th Percentile

50th Percentile

75th Percentile

Number of responses

155

175

200

25

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 2 March 2022 was 1.3367.

25th Percentile

50th Percentile

75th Percentile

Number of responses

End-Jun 2022

1.3175

1.3300

1.3500

24

End-Dec 2022

1.3150

1.3400

1.3500

24

End-Jun 2023

1.2950

1.3400

1.3500

24

4b) What is your central expectation for EURGBP at the following points in the future? The level of EURGBP as of 5pm on 2 March 2022 was 0.8037.

25th Percentile

50th Percentile

75th Percentile

Number of responses

End-Jun 2022

0.8000

0.8000

0.8208

24

End-Dec 2022

0.7938

0.8031

0.8231

24

End-Jun 2023

0.7975

0.8069

0.8313

24

Question 5: Expectations for inflation

5a) Please provide your central expectations for annual CPI inflation after each of the following time intervals. For reference, the most recent CPI print, for January, was 5.5%.

25th Percentile

50th Percentile

75th Percentile

Number of responses

Six months ahead

6.00

7.00

7.50

29

One year ahead

4.00

5.00

6.00

29

Two years ahead

2.00

2.50

3.00

28

Three years ahead

2.00

2.10

2.50

27

Five years ahead

2.00

2.00

2.50

27

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

20

13

7

Risks to CPI path broadly balanced

8

10

13

Risks skewed towards a lower path for CPI

1

6

9

5c) In the Minutes of the February 2022 MPC meeting, the MPC observed that medium-term UK inflation compensation measures in financial markets had remained above their average levels of the past decade. Since then, these measures have moved higher again. Please weight the following factors in order of importance in affecting the change to medium-term inflation compensation measures since the February MPC meeting (responses should sum to a total weight of 100% across the four factors). (a)

Mean weighting (%)

Number of responses

Elevated central expectations for inflation

36.5

27

The balance of risks on inflation being to the upside

25.9

27

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

31.9

27

Other

5.7

27

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.

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