Market Participants Survey results - March 2023

Published on 24 March 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 MarketParticipantsSurvey@bankofengland.co.uk for queries or for further information.

Survey results

The survey was open from 8–10 March 2023 with responses being received from 60 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 4.00%.

	25th percentile	50th percentile	75th percentile	Number of responses
23 March 2023 MPC	4.25	4.25	4.25	60
11 May 2023 MPC	4.25	4.50	4.50	60
22 June 2023 MPC	4.25	4.50	4.50	60
3 August 2023 MPC	4.25	4.50	4.50	60
21 September 2023 MPC	4.25	4.50	4.50	60
2 November 2023 MPC	4.25	4.50	4.50	60
14 December 2023 MPC	4.25	4.50	4.50	60
1 February 2024 MPC	4.00	4.25	4.50	60
One year ahead (March 2024 MPC)	4.00	4.25	4.50	59
End-2024 Q2	3.63	4.00	4.25	59
End-2024 Q3	3.50	3.75	4.00	59
End-2024 Q4	3.00	3.50	3.88	59
End-2025 Q1	2.81	3.25	3.50	54
End-2026 Q1	2.50	3.00	3.50	54

1bi) Please indicate the percentage chance that you attach to Bank Rate being at the following levels after the upcoming 23 March 2023 meeting. Responses should sum to a total weight of 100%. Bank Rate is currently at 4.00%. ⁽^a⁾

	Mean probability (%)	Number of responses
<3.25%	0.1	57
3.50%	0.1	57
3.75%	0.4	57
4.00%	23.1	57
4.25%	63.9	57
4.50%	11.8	57
>4.50%	0.4	57

(a) Note in the question provided to respondents, the different Bank Rate outcomes spanned <3.00% and >5.50% at the extremes, and all 25 basis points increments in between. Results have been aggregated where the mean probabilities above or below a certain outcome were close to zero.

1bii) Please indicate the percentage chance that you attach to Bank Rate being at the following levels after the upcoming 11 May 2023 meeting. Responses should sum to a total weight of 100%. ⁽^a⁾

	Mean probability (%)	Number of responses
<3.50%	0.3	58
3.50%	0.2	58
3.75%	0.5	58
4.00%	13.6	58
4.25%	37.8	58
4.50%	38.5	58
4.75%	7.7	58
5.00%	1.3	58
>5.00%	0.2	58

(a) Note in the question provided to respondents, the different Bank Rate outcomes spanned <3.00% and >5.50% at the extremes, and all 25 basis points increments in between. Results have been aggregated where the mean probabilities above or below a certain outcome were close to zero.

1ci) What do you see as the peak level for Bank Rate in this cycle? ⁽^a⁾

	25th percentile	50th percentile	75th percentile	Number of responses
Peak rate	4.25	4.50	4.50	58

(a) Note, respondents were asked whether their expected level and timing of the peak Bank Rate in this cycle was reflected in their central expectations for Bank Rate responses in question 1a. Where respondents selected ‘Yes’ their peak level was taken from those responses. 58 respondents answered the question this way.

1cii) And at which MPC meeting would you expect this peak to occur (month/year)? ⁽^a⁾

25th percentile	50th percentile	75th percentile	Number of responses
March 2023	May 2023	June 2023	58

(a) Note, respondents were asked whether their expected level and timing of the peak Bank Rate in this cycle was reflected in their central expectations for Bank Rate responses in question 1a. Where respondents selected ‘Yes’ their peak level was taken from those responses. 58 respondents answered the question this way.

1d) Again focusing on your expectations for the peak level of Bank Rate in this cycle please indicate the percentage chance that you attach to Bank Rate peaking at the following levels. Responses should sum to a total weight of 100%.

	Mean probability (%)	Number of responses
At the current level of 4.00%	13.0	57
4.25%	26.5	57
4.50%	31.7	57
4.75%	14.5	57
5.00%	8.6	57
5.25%	2.7	57
5.50%	1.9	57
>5.50%	1.1	57

1e) What probability do you attach to an initial Bank Rate cut of any size occurring over the following timeframes. (Note: probabilities should be cumulative, but do not have to reach 100%.)

	Mean probability (%)	Number of responses
Between now and end-2023 Q2	2.1	53
Between now and end-2023 Q3	8.6	53
Between now and end-2023 Q4	20.7	55
Between now and end-2024 Q1	44.8	57
Between now and end-2024 Q2	62.9	56

1f) With reference to your answers to 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	28	9	3
Risks to Bank Rate path broadly balanced	26	29	29
Risks skewed towards a lower path for Bank Rate	5	21	25

1g) 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
Neutral rate	2.5	3.0	3.5	51

1h) Since the February Monetary Policy Report (MPR) was released, UK short rates have increased. For example, since 2 February 2023 the one-year one-year forward swap rate has increased by 114 basis points (as of 5pm on 7 March 2023). Please weight the contributions of the following factors (%) in affecting this increase in the one-year one-year forward swap rate. Responses should sum to a total weight of 100%.

	Mean weighting (%)	Number of responses
UK specific developments	26.0	57
Global developments	61.4	57
Market technical factors	11.8	57
Other	0.9	57

Within UK specific developments please weight the following sub-factors in terms of their importance of driving these moves. Responses should sum to a total weight of 100%.

	Mean weighting (%)	Number of responses
UK specific demand outlook	47.4	55
UK specific supply outlook	28.7	55
Changing perceptions about the MPC’s reaction function	17.9	55
Other UK developments	6.0	55

Within Global developments please weight the following sub-factors in terms of their importance of driving these moves. Responses should sum to a total weight of 100%.

	Mean weighting (%)	Number of responses
Global demand outlook	43.5	57
Global supply outlook	20.1	57
Changing perceptions about the reaction functions of foreign central banks’	32.4	57
Other global developments	4.1	57

Question 2: Expectations for the Bank’s balance sheet

2a) At its September meeting the MPC voted to begin sales of UK government bonds held for monetary policy purposes, by £80 billion over the following 12 months (comprising both maturing gilts and gilt sales), to a total of £758 billion. Reflecting on this, what is the reduction in the stock of purchased gilts, comprising both maturing gilts and active sales, that you envisage will take place over the following MPC date reference periods? Please note as of 5pm on 7 March 2023 a reduction in the stock of purchased gilts of around £17 billion had taken place leaving the outstanding stock at £821 billion. ⁽^a⁾

	25th percentile	50th percentile	75th percentile	Number of responses
From 8 March 2023 until September 2023	63	63	63	49
From September 2023 until September 2024	79	80	80	49
From September 2024 until September 2025	80	87	100	48
From September 2025 until September 2026	53	80	81	48
From September 2026 until September 2027	39	75	80	48

(a) Note, respondents were provided with Asset Purchase Facility redemptions (as set out in the run-off profile published in Results and usage data on the Bank’s website) corresponding to each period.

Question 3: Expectations for inflation

3a) Please provide the level 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 January 2023 was 10.1%.

	25th percentile	50th percentile	75th percentile	Number of responses
End-2023 Q1	9.00	9.20	9.50	54
End-2023 Q2	6.03	7.00	7.50	54
End-2023 Q3	4.55	5.15	6.00	54
End-2023 Q4	2.93	3.50	4.08	54
One year ahead	2.50	3.00	3.50	53
Two years ahead	2.00	2.50	3.00	52
Three years ahead	2.00	2.00	2.50	50
Five years ahead	2.00	2.00	2.50	51

3b) With reference to your answers to question 3a, how would you describe the balance of risks surrounding your expectations for CPI 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 CPI	19	16	12
Risks to CPI path broadly balanced	21	24	31
Risks skewed towards a lower path for CPI	12	12	5

3ci) Please assign probabilities to the following rates of annual CPI inflation in five years’ time. Responses should sum to a total weight of 100%.

	Mean probability (%)	Number of responses
<=1.00%	4.0	48
1.01%–1.40%	6.4	48
1.41%–1.80%	11.6	48
1.81% –2.20%	29.2	48
2.21%–2.60%	20.4	48
2.61%–3.00%	14.5	48
>3.00%	13.9	48

3cii) Please assign probabilities to the following rates of annual CPI inflation on average from five years ahead to 10 years ahead (ie analogous to the five-year five-year forward rate). Responses should sum to a total weight of 100%.

	Mean probability (%)	Number of responses
<=1.00%	2.9	47
1.01%–1.40%	5.3	47
1.41%–1.80%	11.7	47
1.81%–2.20%	33.3	47
2.21%–2.60%	22.9	47
2.61%–3.00%	15.1	47
>3.00%	8.8	47

Question 4: Expectations for gilt yields

4a) 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 3.822% as of 5pm on 7 March 2023.

	25th percentile	50th percentile	75th percentile	Number of responses
End-March 2023	3.60	3.75	3.89	50
End-June 2023	3.50	3.73	4.00	50
End-September 2023	3.40	3.70	4.08	50
End-December 2023	3.25	3.50	4.00	51
End-March 2024	3.00	3.50	4.00	49

4b) Noting that a spring budget will take place on 15 March, what is your expectation for planned annual gilt sales to be undertaken by the Debt Management Office (DMO) in the 2023/24 financial year?

	25th percentile	50th percentile	75th percentile	Number of responses
Gilt issuance (£ billion)	210	230	246	45

Question 5: Expectations for exchange rates

5a) 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 7 March 2023 was 1.1856.

	25th percentile	50th percentile	75th percentile	Number of responses
End-June 2023	1.1700	1.1900	1.2000	45
End-December 2023	1.1675	1.2000	1.2025	44
End-June 2024	1.1500	1.2000	1.2350	44

5b) 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 7 March 2023 was 0.8919.

	25th percentile	50th percentile	75th percentile	Number of responses
End-June 2023	0.8800	0.8900	0.9000	44
End-December 2023	0.8800	0.9000	0.9000	43
End-June 2024	0.8775	0.8900	0.9000	43

Question 6: Expectations for growth

6a) In the February 2023 MPR, the MPC set out its latest projections for inflation and growth. Its baseline projections for four quarter growth in real GDP were published as: 2023 Q1: -0.3%, 2024 Q1: -0.7%, 2025 Q1: +0.2%, 2026 Q1: +0.9%. How would you characterise the profile of the economy you were assuming in formulating your expectations for Bank Rate in question 1a and CPI inflation in question 3a in comparison to the assessment in the MPR?

	Count
	2023 Q1	2024 Q1	2025 Q1	2026 Q1
More optimistic on the growth relative to the MPR	30	26	21	14
More or less in line with the assessment in the MPR	16	20	23	28
More pessimistic on the growth relative to the MPR	7	7	8	9

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.