The GBP has been waiting for the BOE interest rate decision which will take place later on, and there’s anticipation for a potential dovish shift in the Bank of England’s monetary policy stance towards a more dovish outlook, with the timing of the first rate cut being a key focal point. The prediction suggests that the first rate cut, likely by 25 basis points, could occur in August 2024, with the possibility of it happening as early as June.

This prediction is based on the voting patterns of MPC members, with two hawks (Haskel and Mann) signaling a dovish tilt by voting to keep rates on hold, while Ramsden and Dhingra are expected to vote for a rate decrease. Revised macroeconomic estimates will likely play a significant role in informing this decision, reflecting changes in economic conditions and inflationary pressure.

The Analysis for the Bank of England Monetary Policy Committee (MPC) Decision

• Expected Decision: We anticipate the BOE to keep the Bank Rate steady within the range of 5.25-5.50%, with markets predicting a high probability (95%) of this outcome.
• Previous Meeting Recap: At the previous meeting, rates were left unchanged with an 8-1 vote, with the majority opting to hold. The lone dissenter, Dhingra, took a dovish stance.
• Inflation and Growth: Headline CPI and core CPI have both slightly decreased, while services inflation has remained stable. Monthly GDP growth has slowed, but PMI data for April shows resilience in the services sector.
• Employment and Wages: Despite a rise in the unemployment rate, headline wage growth has remained stable.
• MPC Divisions: Governor Bailey stated optimism about containing inflation, but Deputy Governor Ramsden expressed confidence in receding inflation pressures. Chief Economist Pill indicated that cutting the Bank Rate is not imminent.
• Vote Split and Policy Statement: The MPC’s vote split will likely be closely watched, followed by the policy statement. There are expectations for a dovish tweak or a shift from the previous stance of maintaining restrictive policy for a long duration.
• Market Pricing: Market expectations remain hawkish, with the first rate cut not fully priced until September’s meeting, and a total of 43bps of loosening being priced by year-end.
• Medium-term Inflation Expectations: The accompanying Monetary Policy Report (MPR) is expected to focus on medium-term inflation expectations, which may be revised downward.

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