TD Securities analysts note that markets have scaled back expectations for a March Bank of England cut, but argues the MPC’s domestic focus still supports easing. The bank highlights sufficient UK-specific data to justify a near-term cut, limited immediate CPI pass-through from higher energy, and expects a single cut this month with rates then held steady for the rest of the year.

MPC seen cutting once then pausing

"Markets have significantly reduced their expectations of a March BoE cut. Obviously the situation remains fluid given the situation in the Middle East, but a couple of quick thoughts on how the MPC is set up for its next meeting and beyond:"

"First, the MPC tends to ignore the rest of the world more than other G10 central banks, focusing more on domestic drivers of inflation. On this side, we've seen enough domestically to justify a cut in a couple of weeks."

"Second, on energy price pass-through to CPI, while we'll see petrol prices rise in the short-term, the impact on household utility bills takes much longer to appear in the UK given the Ofgem framework for utility prices (household prices are adjusted only quarterly)."

"As we flagged earlier, central banks will be patient, waiting to assess the situation before reacting to it. For now, a domestically-focused MPC is still likely to cut rates this month, and leave rates on hold the rest of the year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)