Catherine Mann and diehard dove Swati Dhingra wanted to go big on Thursday, when the Bank of England delivered the third rate cut of what, so far, is a very cautious cycle.

Both voted in favor of a 50bps move, even as the new MPC report found the inflation trajectory revised up, and not by a little bit.

“Progress on underlying disinflation in domestic prices and wages ha[s] generally continued [but] headline CPI [is] now expected to rise quite sharply in the near-term,” the meeting minutes read.

The first figure shown below always feels gratuitous to the extent it underscores just how wrong the BoE really was on inflation over the last several years. That’s not a dead horse that needs further beating. That period, defined as it was by disease, war and successive domestic political shocks befitting of a dark comedy, was a forecaster’s worst nightmare.

With those caveats, focus on the gray highlighted area with the pink, dashed outline in the chart. The gap between the February 2025 near-term forecast (in red) and the November forecast (in pale yellow) gives you a sense of what “quite sharply” means.

Headline CPI’s expected to reaccelerate to almost 4% later this year (thanks partly to energy), up from the sub-3% the bank projected in November. Also note that the projections now extend all the way into 2028. (Write your own jokes.)

Growth has generally disappointed in the UK, and is now seen slower versus the November outlook. It should turn up mid-year, though, where “should” means that’s the best guess from economists, whose track record forecasting growth outcomes only looks good by comparison to their luck forecasting inflation.

Thursday’s policy statement was replete with circumspection, which is appropriate considering rampant macro, fiscal and political uncertainty in the UK. The BoE said disinflation progress has allowed the bank to “withdraw gradually some degree of policy restraint,” but reiterated the necessity of keeping rates in restrictive territory “so as to continue to squeeze out persistent inflationary pressures.”

As the figure reminds you, services inflation in the UK is still running very warm, although December’s YoY print, 4.4%, counted as the coolest since Vladimir Putin invaded his neighbor.

The BoE’s forward guidance was laughably vague on Thursday and comically verbose. Hold that latter thought.

The bank said that going forward, it’ll take a “gradual and careful approach” to any additional rate cuts. The assumptions built into the forecasts suggest just another two cuts for the whole cycle, but between the unanimous vote for a cut of some size on Thursday (if seven people vote for a 25bps cut and two people vote for 50, everyone voted to cut) and the statement language (which did tip more easing), you come away confident that whatever hawks’ reservations, at least a couple more reductions are a foregone conclusion, probably this year.

Markets focused almost entirely on the dovish dissents (i.e., the calls from Mann and Dhingra for a half-point move) with traders penciling in very high odds (~90% or so) of three additional 25bps cuts this year. If realized, that’d bring Bank Rate to 3.75%, as illustrated above.

Coming back to the forward guidance, the BoE explained how policymakers are weighing two-sided risks and what those risks, if realized, would mean for rates.

“Should there be greater or longer-lasting weakness in demand relative to supply, this could push down on inflationary pressures, warranting a less restrictive path of Bank Rate,” the BoE explained, adding that, “If there were to be more constrained supply relative to demand, this could sustain domestic price and wage pressures, consistent with a relatively tighter monetary policy path.”

That’s a lot of words to say “anything can happen.”