- Prior 0.25%
- Bank rate vote 5-4 (minority camp wanted to hike by 50 bps to 0.75%)
- Voted unanimously to reduce the stock of UK government bond purchases
- Bank rate still preferred tool for adjusting monetary policy stance
- Ramsden, Saunders, Haskel, Mann wanted to raise rates by 50 bps to 0.75% instead
- Rate hike needed due to current tightness of labour market
- There are also signs of greater persistence of domestic cost pressures
- Minority camp think pay and other pressures could be more persistent than forecast
- Minority camp believe that 50 bps rate hike would help check inflation expectations
- Statement summary
- Inflation peak seen at around 7.25% in April (previously around 6.00%)
- Inflation in two years’ time seen at 2.15% (previously 2.23%)
- Inflation in one years’ time seen at 5.21% (previously 3.40%)
- Inflation in three years’ time seen at 1.60% (previously 1.95%)
There are hawkish undertones all over the report but I reckon the biggest one is arguably the bank rate vote itself. It was a 5-4 vote with the minority camp wanting to hike rates by 50 bps to 0.75% instead of just the 25 bps performed today.
That pretty much tees up the next move for March and if inflation pressures keep up, I don’t see why there might not be a move when the time comes. Besides that, there is a bump to the peak inflation view and that also sort of heightens the urgency to tighten in order to keep inflation expectations in check for the most part.