Highlights:

• Today, the BoE raised Bank Rate to 0.5% from 0.25% while four of nine MPC members voted for a 50 bps hike to 0.75%, signalling that the Bank has become more hawkish.
• The Committee also voted to begin to reduce the stock of UK government bonds as well as non-financial investment-grade corporate bond by ceasing to reinvest maturing assets.
• The BoE now sees inflation peaking at 7.25% in April, around 2 percentage points higher than expected in the November Report. This also suggests a stronger rate hiking cycle.
• We had already revised our outlook for Bank Rate to 1% by end of this year and to 1.25% early 2023. Risks are now for hikes to come earlier. We will refine our outlook in an upcoming Focal Point.

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