MNI BOE Review - Dec 2021: Guidance Softened for February

We have just released our December BOE review including summaries of 20 sellside notes.

• The MNI Markets Team, along with 80% of analysts and the majority of financial markets participants, had thought that the Bank of England would favour a risk management approach and wait until February/March for the first Bank Rate hike with Omicron cases rising fast in the UK.
• However, the MPC voted 8-1 to raise Bank Rate by 15bp to 0.25%, citing rising inflation (now expected to peak around 6% in April), a strong labour market and uncertain effects from the Omicron variant in the medium-term.
• While we would lean towards expecting a February hike, there are two uncertainties. First, what will happen with Omicron over the next 7 weeks? Case numbers look high now, and there is a decent probability of some further government measures in England after Christmas.
• Second, we caution the language surrounding the Bank’s future guidance has softened somewhat. In November, the statement read: “It will be necessary over coming months to increase Bank Rate.” Now the statement reads “Some modest tightening of monetary policy over the forecast period was likely to be necessary.” To us “coming months” sounds more imminent than “over the forecast period.”

See the full report here.