Bank of England: Less dovish than expected

In Short

UK headline inflation had surprised on the downside at the end of last year, falling from 6.7% yoy in September to 4.6% yoy in November and further to around 4% yoy for the rest of 2023. This development was unforeseen by the BoE which still projected an inflation average of 4.6% in Q4 2023.


  • As widely expected, the Bank of England (BoE) left its monetary policy unchanged today. However, two Monetary Policy Committee (MPC) members still voted for a 25 bps hike, one for 25 bps cut, while the other six decided to keep the rate. This compares with a more coherent consensus forecast of one hiking but eight maintaining votes. 
  • While the BoE agrees that inflation will likely fall to the 2% target as early as in Q2 2024, it expects a re-increase thereafter with a rate of 2¾% by the end of this year. Accordingly, Governor Bailey insisted that the MPC would need more evidence that “inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates”.
  • In its forward guidance, the BoE changed to a softer tone mainly cutting out its tightening bias. 
  • We expect the BoE to start cutting rates in June (May has become less likely today in our view) by 25 bps and a total of 100 bps by the end of 2024. Markets have not moved much after today’s meeting. 


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Bank of England: Less dovish than expected

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