BoE Preview: Forecasts from seven major banks, staying the course awaiting more data

We anticipate that the BoE will hold the rate at 5.25%. We may see another three-way split in the vote. The current guidance already suggests the next move is likely to be a cut. We don’t think that the MPC will drop a strong hint on the timing of that cut at this meeting. Labour gradually shifts from a seller’s market to a buyer’s market. However, wage growth and services inflation currently remain inconsistent with a sustained 2% inflation. We think the BoE will trail behind the Fed and the ECB, with the first rate cut expected in September. This is still anticipated to occur well before core inflation is on track to reach 2%.

We expect the MPC to leave key guidance largely unchanged and hold Bank Rate at 5.25% at this meeting, with a wait-and-see message. There's scope to soften the language around underlying inflation, but little else should change.

We expect the BoE to keep the Bank Rate unchanged at 5.25%. Overall, we expect the MPC to repeat its previous communication relying on a data dependent approach. We expect a muted reaction in EUR/GBP with risks tilted to the topside.

We expect the BoE to reiterate its previous forward guidance that rates need to stay sufficiently restrictive for an extended period. Watering down that language would be seen as tantamount to opening the door to an imminent rate cut, something we doubt the committee wants to do. The more interesting question is whether the two hawks who voted for a rate hike in February finally throw in the towel, though we wouldn’t be surprised if at least one of them doesn’t. At the same time, we don’t expect lone dove Swati Dhingra to be joined by other members in voting for a rate cut this month. Our view is that the first rate cut will come in August, once the inflation data for the second quarter has come through.

Technical recession and progress on inflation likely mean BoE policymakers are considering rate cuts in the coming months, although we expect the BoE to remain on hold this week. UK disinflation has been gradual which likely means the BoE delivers rate cuts in Q2. As of now, we believe the BoE will deliver its first cut at the June meeting. We would note, however, that progress on disinflation and subdued activity at least raises the possibility that BoE easing could be delivered earlier than we expect. Not as early as March, but the March meeting could indicate as to when policymakers are thinking about the timing of a pivot to easing monetary policy.

We expect the MPC to hold rates steady this week, with the main move likely to be on the vote split – where hawkish dissent is likely to thin further. 

We expect the MPC to maintain its message that it needs further evidence that disinflation is on track before it starts easing. Recent statements from MPC members and the fact that key April wage data will be released after the May meeting have led us to push back our projection of a first rate cut to June.