BoE: Keeps hawkish twist to neutral stance- Danske Bank

Today, the Bank of England kept interest rates and its purchase program unchanged. According to analysts from Danske Bank the BoE will remain on hold for the next 12 months. 

Key Quotes: 

“In line with our expectation, the Bank of England (BoE) made no policy changes at its May meeting and reiterated its neutral stance by repeating it could move ‘in either direction’.”

“However, against our expectation, the BoE also maintained its hawkish twist. First, Kristin Forbes (a known hawk) still voted for a hike (note, though, that she is leaving the BoE on 30 June 2017, which makes her hawkish stance less important). Second, some members still think that ‘…it would take relatively little further upside news…for them to consider that a more immediate reduction in policy support might be warranted’. The meeting summary also states that the BoE thinks the current market pricing of BoE hikes is a bit too soft if the economy lives up to the expectations. Still, markets had expected an even more hawkish Bank of England.”

“We still expect the BoE to remain on hold for the next 12 months. While we think it is unlikely the BoE will tighten monetary policy in a time of elevated political uncertainty, we think we would need to see substantially slower growth and/or higher unemployment before easing becomes likely again”.