- Prior 3.00%
- Bank rate vote 7-2 vs 9-0 expected (Tenreyro, Dhingra voted to keep rates unchanged at 3%, Mann voted to raise rates by 75 bps instead)
- Further increases in bank rate may be required
- Q4 GDP seen at -0.1% q/q (previously -0.3% in November)
- Labour market remains tight
- Inflation expected to fall gradually in Q1 2023
- But there has been evidence that could indicate greater persistence of inflation
- That justifies a further forceful monetary policy response
- BOE will consider and decide the appropriate level of bank rate at each meeting
- Full statement
The split in votes is the most eye-catching detail at first glance and the pound has taken a bit of a knock on that. And when you put that together with some changes in the language on forward guidance, that makes for a more dovish rate hike this time around by the BOE.
In terms of the dissent, Tenreyro and Dhingra argued that 3% rates are "more than sufficient" to bring inflation back towards the 2% target, in the view that inflation has peaked - as according to the latest projections by the central bank.
As for the language, the BOE omitted the wording that "policy is not on a pre-set path" and the part on any changes to the "scale, pace and timing" to the bank rate will depend on the outlook. In reading that, I would say it just means that they are reaching a point where a slower pace of rate hikes will be needed and a top is coming in soon.