BOE - Bank of England

15-MAR-2024

BoE Announcement (Thu):

The MPC is expected to hold the Base Rate at 5.25% with the potential for another three-way split. As a reminder, the February decision saw Mann and Haskel calling for a hike, Dhingra for a cut and the remaining 6 for unchanged. In terms of market pricing, an unchanged rate is priced at nearly 100% as the BoE awaits more progress on inflation. In terms of recent data, the MPC will be presented with further inflation metrics on the day before the announcement. However, the January release showed headline and core CPI holding steady on a Y/Y basis at 4.0% and 5.1% respectively. On the growth front, M/M GDP in January expanded by 0.2%, suggesting that there may be a turning point from the H2 recession seen last year. More timely PMI data for January saw the services metric slip to 53.8 from 54.3, manufacturing rise to 47.5 from 47.0 with the composite ticking higher to 53.0 from 52.9. In the labour market, the unemployment rate in the 3M period unexpectedly ticked higher to 3.9% from 3.8%, whilst headline wage growth slipped to 5.6% from 5.8%. Commentary from the MPC has seen Governor Bailey state that "we don't need inflation to come back to target before we cut interest rates", whilst Chief Economist Pill said his baseline scenario for the timeline of rate cuts remains some way off. In terms of the policy statement, no major changes are expected after the Bank opted to drop its "further tightening" bias in February. Beyond the upcoming meeting, an August cut is nearly fully priced in with a total of 59bps of easing seen by year-end.