BoE: A hike ten years in the making - TDS

Analysts at TDS explain that as widely expected, the BoE MPC voted to hike Bank Rate yesterday by 25bps to 0.50% and the vote was 7-2 in favour, with Deputy Governors Ramsden and Cunliffe dissenting on the absence of clear wage growth pressures.  

Key Quotes

“Missing from yesterday’s policy decision was any guidance on future rate hikes, with the reference to the slope of the yield curve in September’s statement removed. The two hikes by 2020 assumed in the Inflation Report appear, in the MPC’s view, to be appropriate. We think that the Bank of England will again hike rates in May 2018.”

“FX: Sterling’s bullish potential has been dented by a cautious and calibrated MPC. We think the GBP may drift a bit lower from here, but weakness should be contained unless fresh catalysts emerge. These are most likely to arise from the USD side, we think, as several key questions there still need answers. A move below 1.3027 may usher in a new 1.26-1.30 trading range in the weeks ahead.”

“Rates: The minutes failed to signal a hiking cycle in the UK. Timing of the next rate hike will be continuously challenged in the near term. From a tactical perspective, the short-sterling contracts, especially Mar18 and Jun18, could see prices move higher.”