There was “an outside chance” the BoE would hike on Thursday, or at least according to MUFG analyst Lee Hardman.
“The conditions for a hike in May have been met so why wait?”, Hardman asked, before answering his own question as follows: “policy makers may not want to signal an even faster pace of rate hikes this year of up to three.”
A May hike is now a virtual certainty – or at least according to markets. “In BOE speak, higher wages point to upside risks to domestically generated inflation and improving jobs numbers point to further erosion of slack,” Scotiabank’s Alan Clarke said earlier this week. “In other words, this supports the case for a May rate hike.”
U.K. wages are now climbing at their fastest pace since the end of 2016.
“We do not think that the March BoE meeting will weaken sterling either this week,” Barclays wrote, in their attempt to try and boil the bank’s decision calculus down over the weekend. They added: “While unchanged policy is widely expected, SONIA markets still price about an 80% likelihood of a 25bp MPC rate hike in May and the MPC’s statement will likely be consistent with current market pricing.”
Right. And so, inline with consensus, the BoE is on hold, following a spate of data including today’s retail sales beat.
- BANK OF ENGLAND MAINTAINS BENCHMARK INTEREST RATE AT 0.5%
- BANK OF ENGLAND VOTES 7-2 TO MAINTAIN BENCHMARK INTEREST RATE
- BOE HOLDS ASSET PURCHASE PLAN AT 435 BLN PNDS
- BOE HOLDS CORPORATE BOND PLAN AT 10 BLN PNDS
Gilts fell and the knee-jerk reaction in the pound was to day highs: