Justin had the news on the Bank of England maintaining its policy rate at 5.25%, which was as expected:
And also on Bank of England Governor Bailey speaking later:
Bailey tried sounding hawkish. At the very least he affirmed the Bank’s stance on maintaining the Bank rate at its current peak remains unaltered, and indicated that the Monetary Policy Committee could consider further rate increases if deemed necessary.
The decision came through a split vote of 6 to 3. It sparked a noticeable uptrend in GBP Pound and triggered a modest downturn in gilts. The market reaction seems to be a response to the strong rally in bonds following the Federal Reserve’s Wednesday, and diverged from some analysts’ expectations of a more substantial 7 to 2 vote consensus.
Notably, the BoE appeared to downplay the latest labour market and inflation data, suggesting a cautious approach towards the inflation outlook. This indicates that the bank is not yet fully convinced that inflation is under control to a degree that would warrant a more relaxed stance on future rate adjustments.
Expectations out here are still mainly anticipating a Bank of England rate cut by around May or June (the probability of a May cut is priced around 90%), and 100 to 125bp lower for the Bank Rate by year-end 2024.