BoE keeps rates steady, but shows more of a dovish tone

The BoE produced few surprises this lunchtime, holding Bank Rate steady at 5.25%, as expected, though the decision did have more of a dovish tinge to it than that delivered in February.

While guidance that policy must remain ‘sufficiently restrictive for sufficiently long’ was maintained, the MPC are no longer as divided on the policy outlook, with the 2 hawks from last month now joining the majority of the MPC in voting for Bank Rate to be maintained.

Furthermore, Governor Bailey indicated that “things are moving in the right direction” in terms of the inflation outlook, and thus the ability to begin to normalise policy.

Overall, the MPC remain in data-dependent mode, focusing primarily on services inflation and earnings pressures, though a June start to the easing cycle remains plausible, particularly with headline inflation likely to be back at the 2% target in spring.