BoE: Hawkish tilt may fuel sentiment over two hikes in 2018 - ING

Viraj Patel, Research Analyst at ING, suggests that following a relatively constructive week of Brexit developments and UK data, the odds of a more hawkish tilt at today’s Bank of England policy meeting have risen materially.

Key Quotes

“In theory, weekly events should not alter the BoE’s policy reaction function much – although under the unique setting of Brexit, the MPC are having to take a more nimble approach when it comes to short-term policy decisions. Given that markets have broadly shifted to the idea of a May rate hike (70% priced in), we doubt that the MPC will feel the need to send any pre-committing signal in the policy statement. Instead, any hawkish tilts today are likely to come in the form of (a) one or two rate hike dissenters (McCafferty and/or Saunders) and (b) acknowledgement that market expectations remain consistent with BoE policy.”

“Either signal may implicitly fuel sentiment over two BoE rate hikes in 2018 – eliciting a knee-jerk move higher in GBP/$ to 1.4200/50.”