BoE raises Bank Rate by 0.25% to 0.50% today, by a slight majority of 5-4 vote. Four hawks (Jonathan Haskel, Catherine L Mann, Dave Ramsden, Michael Saunders) voted for a more aggressive 50bps hike to 0.75%. The other five (Andrew Bailey, Ben Broadbent, Jon Cunliffe, Huw Pill, Silvana Tenreyro) won the vote.
Meanwhile, the MPC voted unanimously to begin to reduce stock of government bonds by ceasing to reinvest maturing assets. It also decided to start reducing stock of corporate bonds by ceasing to reinvest maturing assets and complete a bond sales program no earlier than towards the end of 2023.
Going forward, the extent of any further tightening in monetary policy will “depend on the medium-term prospects for inflation”. If the economy develops broadly in line with the February Report central projections, “some further modest tightening in monetary policy is likely to be appropriate in the coming months.”
Sterling surges sharply after the release.
In the new four-quarter GDP projections:
- 2022 Q1 was revised down from 9.5% to 7.8%.
- 2023 Q1 was revised down from 2.1% to 1.8%.
- 2024 Q1 was revised up from 1.0% to 1.1%.
- 2025 Q1 was at 0.9% (new).
CPI inflation projections:
- 2022 Q1 raised from 4.6% to 5.7%.
- 2023 Q1 raised from 3.3% to 5.2%.
- 2024 Q1 unchanged at 2.1%.
- 2025 Q1 to slow to 1.6%.
Unemployment rate projections:
- 2022 Q1 lowered from 4.2% to 3.8%.
- 2023Q1 raised from 4.0% to 4.2%.
- 2024 Q1 raised from 4.2% to 4.6%.
- 2025 Q1 to rise to 5.0%.
Implied path for Bank Rate:
- 2022 Q1 lowered from 0.5% to 0.4%.
- 2023 Q1 raised from 1.0% to 1.3%.
- 2024 Q1 raised from 1.0% to 1.4%.
- 2025 Q1 at 1.3%.
