Bank of England didn’t deliver the hawkish tilt – Rabobank

As expected, the Bank of England (BoE) kept its monetary policy stance unchanged on Thursday. According to analysts from Rabobank the attention will quickly shift to the August meeting when the Monetary Policy Committee has a full set of fresh staff forecasts at its disposal and will have to make a new decision on the pace of gilt purchases. They don’t think the BoE will have to raise rates in 2021 or in 2022. 

Key Quotes: 

“This clearly wasn’t the hawkish tilt on which some market participants had placed their bets. The attention will quickly shift to the August meeting, when the MPC has a full set of fresh staff forecasts at its disposal and will have to make a new decision on the pace of gilt purchases.”

“While it is clear that the economy experienced a sugar rush in the second quarter, probably leading to some stellar growth figures, we continue to find it difficult to see how consumer spending could exceed pre-pandemic levels in a sustainable way. The MPC members also “have a range of views” on whether the upside news on activity signalled stronger future demand growth, or simply a faster recovery to the pre-Covid level of GDP. We would argue the latter and expect moderation in growth before we’re back at trend. A moderation in inflation would then follow from early-2022 onwards. As such, we don’t think that the Bank of England will be in the position to raise interest rates this year or next.”