As was widely expected the Bank of England have voted unanimously to keep the current policy mix in place, with the base rate unchanged at 0.75%. The overall tone of the accompanying statement was fairly mixed and as thus, there’s been a fairly muted market reaction with the pound remaining close to its highest levels of the day.
The message is in keeping with prior communications by and large, with the bank stating that they foresee ongoing tightening of monetary policy if the economy grows as forecast, but checking this with the caveat that increases will likely be at a gradual pace and to a limited extent. The growth forecasts for this year and next were revised lower by 0.1%, in what could be seen as a negative sign but on balance the report could be considered mildly positive. Stating that the output gap has closed and that this may mean a possible faster pace of hikes post-Brexit is arguably the most hawkish comment and pound bulls may look to focus in on this.
Governor Carney’s press conference is still to come but the chances of a surprise and any real market moving news from this event remain low, with the bank clearly in wait-and-see mode until there is greater clarity on Brexit.