The research team at RBC Capital markets explains that the BoE’s May MPC meeting is expected to conclude with the main policy settings remaining unchanged as a 7-1 vote on Bank Rate is anticipated, with Forbes likely to maintain her call for a hike (though the risk is a move to 6-2).
“Since the February Inflation Report, growth has disappointed expectations a little and inflation has exceeded the Bank’s forecast a little. This makes the trade-off faced by the MPC trickier, but we expect that the core neutral stance will hold this time.”
“That means the MPC is likely to continue to tolerate a forecast for above-target inflation by exercising the flexibility in its remit to have due regard for the risk that a quicker return of inflation to target could trigger undesirable volatility in output and employment. The main risk for GBP is any mention in the press conference of the 2.5% (TWI) appreciation of GBP since the last Inflation Report being unwelcome.”