BoE: Steady policy well into 2018 and potentially beyond - Rabobank

Research Team at Rabobank, expects steady BoE’s policy well into 2018 and potentially beyond and also expects the BoE to step up hawkish commentary to control any further bout of weakness in the pound.

Key Quotes

“UK CPI inflation screeched past the Bank of England’s 2% target to register a stronger than expected 2.3% y-o-y rise in February. One member of the MPC, Forbes, voted in favour of an immediate rate rise in March. Her arguments centred on the risk that CPI inflation could remain above target for at least three years. That said, Forbes is due to leave the MPC in late June. There are also signs that the economy is beginning to show weakness related to the impact of inflation and political uncertainty.”

“The MPC are acutely aware that “attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and, in all likelihood, even weaker income growth”. We expect steady policy well into 2018 and potentially beyond. That said, we would expect the BoE to step up hawkish commentary to control any further bout of weakness in the pound.”