- Prior 0.25%
- Bank rate vote 5-4 (minority camp wanted to hike by 50 bps to 0.75%)
- Voted unanimously to reduce the stock of UK government bond purchases
- Bank rate still preferred tool for adjusting monetary policy stance
- Ramsden, Saunders, Haskel, Mann wanted to raise rates by 50 bps to 0.75% instead
- Rate hike needed due to current tightness of labour market
- There are also signs of greater persistence of domestic cost pressures
- Minority camp think pay and other pressures could be more persistent than forecast
- Minority camp believe that 50 bps rate hike would help check inflation expectations
- Statement summary
- Inflation peak seen at around 7.25% in April (previously around 6.00%)
- Inflation in two years' time seen at 2.15% (previously 2.23%)
- Inflation in one years' time seen at 5.21% (previously 3.40%)
- Inflation in three years' time seen at 1.60% (previously 1.95%)
There are hawkish undertones all over the report but I reckon the biggest one is arguably the bank rate vote itself. It was a 5-4 vote with the minority camp wanting to hike rates by 50 bps to 0.75% instead of just the 25 bps performed today.
That pretty much tees up the next move for March and if inflation pressures keep up, I don't see why there might not be a move when the time comes. Besides that, there is a bump to the peak inflation view and that also sort of heightens the urgency to tighten in order to keep inflation expectations in check for the most part.
The pound has jumped on the decision with cable moving up from 1.3550 to 1.3620. Of note, EUR/GBP is making fresh lows since February 2020 and is testing waters below key support at 0.8300.
