BoE left the Bank Rate unchanged at 5.25% as widely expected. However, two MPC hawks (Jonathan Haskel and Catherine Mann) voted for another 25bps to 5.50%. Meanwhile, one dove (Swati Dhingra) voted for a 25bps cut to 5.00%. That resulted in a 6-3 vote for the decision.
Nevertheless, the central bank dropped tightening bias by omitting the language that “Further tightening in monetary policy would be required….” Instead, it’s now “prepared to adjust monetary policy as warranted by economic data”.
BoE will continue monitor a range of measures of “the underlying tightness of labour market conditions, wage growth and services price inflation.”
CPI is projected to fall temporarily to 2% in Q2 2024, before rising again in Q3 and Q4. BoE sees CPI to be at to be at 2.8% in Q1 2025 (up from prior 2.5%), then 2.3% in Q1 2026 ( up from 1.9%), then 1.9% in Q1 2027 (new).
Four-quarter GDP growth is seen at 0.5% in Q1 2025 (up from 0.0%), the 0.8% in Q1 2026 (up from 0.6%), and 1.5% in Q1 2027 (new).
These are conditioned on a lowered market-implied path for Bank Rate that declines from 5.1% in Q1 2024 (prior 5.3%), then falls to 3.9% in Q1 2025 (down from 5.0%), and then 3.3% in Q1 2026 (down from 4.4%), and 3.2% in Q1 2027 (new).
Full BoE statement here.
