The Bank of England kept, as expected, its monetary policy unchanged after this week’s meeting. According to analysts at Wells Fargo, the policy announcement was arguably modestly hawkish in tone. They now forecast an initial rate increase during the third quarter of 2022 (compared to early 2023 previously).
Key Quotes:
“The Bank of England (BoE) held monetary policy steady at today's announcement, but sent a subdued signal of future policy tightening in its accompanying statement. Specifically, the BoE said some modest tightening of monetary policy over the forecast period is likely to be necessary if the economy evolves in lines with its projections.”
“The BoE also indicated the threshold for unwinding its quantitative easing purchases was lower than previously.”
“Given a monetary policy announcement that was arguably modestly hawkish in tone, we have modestly brought forward our expected timing for the Bank of England's rate hike cycle. We now forecast an initial rate increase in Q3-2022 (compared to early 2023 previously), albeit by only 15 basis points in 0.25%. We expect the policy rate to remain steady in Q4-2022. In addition, while beyond our formal forecast horizon we anticipate multiple rate hikes during 2023, and would expect further cumulative rate increases of 50-75 basis points during that year.”
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