Lee Sue Ann, Economist at UOB Group, reviews the latest BoE monetary policy meeting (February 2).

Key Takeaways

“As expected, at its first meeting of 2023, the Bank of England (BOE)’s Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase the Bank Rate by 50bps to 4%. The latest decision marked the 10th increase since the BOE started hiking in Dec 2021, bringing the key rate to its highest since 2008.”

“The BOE dialed back some of its previous bleak economic forecasts. Annual CPI inflation is expected to fall to around 4% towards the end of this year, alongside a much shorter and shallower recession than previously set out. However, the MPC noted that the labor market remains tight and domestic price and wage pressures have been stickier than expected, suggesting risks of greater persistence in underlying inflation.”

“We see the BOE nearing the end of its current tightening cycle, penciling in 25bps hikes at the next 2 meetings on 23 Mar and 11 May, seeing the Bank Rate peak at 4.5%. We recognize, though, the risks to our forecasts given the BOE’s challenge of fighting inflation amid a difficult economic outlook, as reflected by the range of views on the MPC at this meeting.”