BoE raises Bank Rate by 25bps to 4.50% as widely expected. The decision was made by 7-2 vote with known doves Silvana Tenreyro and Swati Dhingra voted for no change.
In the accompanying statement, BoE left open the door for further rate hike, noting that “if there were to be evidence of more persistent (inflation) pressures, then further tightening in monetary policy would be required.”
BoE expects inflation to “fall sharply from April” and decline to “a little above 1% at the two and three-year horizons”. That would be “materially below the 2% target then. “This reflects the emergence of an increasing degree of economic slack and declining external pressures that are expected to reduce CPI inflation,” it added.
Regarding the economy, GDP is expected to be “flat over the first half” of 2023. Economic activity has been “less weak than expected in February”, with the path of demand “materially stronger than expected. Labor market remains tighter than February report.