BoE: Hawkish shift – Deutsche Bank

Analysts at Deutsche Bank explain that as expected the MPC members voted unanimously to keep rates on hold at 0.5%, but the outlook comments seemed more hawkish.

Key Quotes

“The BOE Governor Carney said “it will be likely to be necessary to raise rates to a limited degree in a gradual process but somewhat earlier and…greater extent than what we had thought in November”. A stronger than expected global economy, improving wages and the continuing weak outlook for the UK’s potential supply underpinned the Bank’s more hawkish position. The bank has also upgraded its GDP growth forecasts for 2018 to 1.8% (+0.2ppt) while 2019 was steady at 1.7%.”

“Overall, the meeting was broadly in line with our UK team’s expectations that the MPC would endorse tighter market pricing, without wanting to pre-commit to a May hike. They maintain their view that the BOE will keep rates on hold in May, as they expect demand to slow. Bloomberg’s implied odds for a May cash rate hike has increased 20ppt to 67%.”