BoE: May rate hike firmly in play - ING

James Smith, Developed Markets Economist at ING, explains that the Bank of England has kept the door wide open to a rate hike in May, while keeping policy on hold, although two of the hawks – Saunders and McCafferty – opted to vote for an immediate rate hike.

Key Quotes

“Key takeaways from the March meeting:

1. The Bank is still gearing up for a May rate hike: All in all, the statement from the Bank of England’s latest meeting keeps a May rate hike firmly on the table. The Bank has said “ongoing tightening" will likely "be appropriate”, although interestingly policymakers have opted against sending a stronger/more explicit rate hike signal.
2. No acknowledgement of the Brexit breakthrough – but perhaps not surprising: The BoE hasn’t commented on this week’s Brexit breakthrough. Instead, it continued to emphasise the overall process as the “most significant influence” on uncertainty.
3. Policymakers continue to be pleased by wage growth progress: The Bank has made it pretty clear at recent meetings that wage growth will be a deciding factor in its decisions about impending rate hikes.
4. Still keeping its cards close to its chest: By alluding to the need for "ongoing tightening", policymakers have kept the door open to a second rate hike in 2018. We certainly wouldn’t rule it out, and markets are increasingly coming around to this view – there’s now not far off two hikes priced in for this year.”