BoE: Surprise hawkish shift - Rabobank

The BoE surprised markets with their hawkish shift, not because there was a sudden change in policy but instead of a single dissenter there were now three MPC members calling for a rate hike, making the vote a 5-3 split (one MPC seat is currently vacant) explains Bas van Geffen, Quantitative Analyst at Rabobank.

Key Quotes

“It is reasonable to conclude that the Bank's hawkish signal represents some concerns about the soft position of the currency (relative to June 2016). Indeed, the MPC have made clear that they attribute the rise in inflation to be largely a function of the drop in the value of the pound. This hawkish cry from two additional members of the Committee signals that while there is some tolerance for Brexit-related inflation, this isn’t unlimited. For some, the trade-off between supporting growth and suppressing inflation may be shifting towards the latter of the options, and today’s vote therefore removes some upside potential for UK inflation – and may provide some support for the currency.”