What to watch (2/2): Guidance

• There are three main strands to the guidance. First, the new “neutral” part of the guidance that was repeated throughout the press conference by Bailey:
• “The Committee will keep under review for how long Bank Rate should be maintained at its current level.”
  We would expect this to remain unchanged. If a dovish tweak were to be introduced here it could add something to this part of the statement about the progress thus far having been encouraging, or if more explicit to add a clarifying part to the statement that the next move in Bank Rate was more likely to be down than up.
• "Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC’s remit."
  In terms of this part of the guidance, again we expect no changes, but the dovish tilt that could be applied here would be if (as in Pill’s speech) clarification was added that Bank Rate would likely still be restrictive even after cuts began.
• Finally, the following guidance was tied to having applied “since last autumn” in the February MPS. We thought at the time that this was a notable step, but was not really picked up on in the analyst reviews that we read following the meeting. If any of the guidance is to be dropped, we think that this is the most likely part. “The Committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates.”

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