BoE: Hold stance and resilient UK data – TD Securities

TD Securities economists, including Julie Ioffe and colleagues, expect the Bank of England to keep Bank Rate at 3.75% in a unanimous decision, maintaining a wait-and-see stance. They highlight resilient UK GDP and labour data, stronger inflation projections due to higher energy prices, and see the MPC emphasising scenario analysis as inflation stays above target in 2026 while growth softens later.

BoE seen on prolonged policy hold

"We expect the Bank of England to remain on hold, leaving Bank Rate at 3.75% in another unanimous vote. Last meeting showed a broad desire to wait and see, which was construed as hawkish at the time, but has since been clarified by MPC members as a measured approach to monitoring how the conflict will pass through to domestic prices beyond energy."

"We also see limited changes to the statement, acknowledging that "CPI inflation will be higher in the near term" and that "the MPC is to increased risk ... through second-round effects"."

"All told, the projections are almost certain to point to higher inflation across Years 1 & 2, while GDP growth is a little stronger initially and a little weaker further out. Year 2 inflation is likely to now be slightly above 2% (was 1.8%), and the risk is that Year 3 inflation nudges upward a bit to above the February forecast of 2.0%."

"A big question will be whether the MPC decides to emphasise scenarios much like some other central banks have done in recent projection exercises. This is something they've put increasing emphasis on in recent MPRs, so it wouldn't surprise us to see ECB-like scenarios of more severe energy price pressures, meaning more persistently high inflation and weaker GDP growth."