Rabobank analysts point out that as per expected lines, the Bank of England MPC kept rates unchanged at 0.75% and there were no dissenters, even though there had been some speculation of a split vote.
“The statement notes that the downside risks to growth have increased due to trade tensions and Brexit uncertainties. The MPC also expects inflation to fall below the 2%-target later this year.”
“The forward guidance was left untouched nonetheless. The MPC still judges that a tightening of monetary policy at a gradual pace and to a limited extent would be appropriate.”
“This optimism is grounded on a model-based view of the world, which in turn is centred on the assumption of a smooth transition towards new trading relationships. The market is not willing to take this for granted – rightly so.”
“Despite several recent hawkish speeches, there was no signal that the MPC actually wants to hike this year. We forecast no rate hikes for this year and next.”
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