Rabobank's Senior Macro Strategist Stefan Koopman reviews the latest Bank of England (BoE) decision to hold the Bank Rate at 3.75%, noting Governor Bailey’s description of an 'active hold' as he balances inflation persistence against risks to employment and activity. The bank expects more Monetary Policy Committee (MPC) members to support a hike in June, with timing and scale heavily dependent on developments around Hormuz and inflation pass-through, and still anticipates one rate increase this year.

BoE holds as hike risks build

"As expected, the Bank of England held the Bank Rate at 3.75%. Chief economist Huw Pill was the lone hawkish dissenter."

"Governor Bailey framed this decision as an 'active hold', acknowledging the risks of inflation persistence vis-à-vis the growing risks to employment and activity."

"The BoE reiterated it is "ready to act as necessary," but Bailey's remarks in the minutes and the press conference signalled some reluctance to do so."

"An overload of scenarios and caveats meant the meeting delivered little actionable guidance."

"We expect more MPC members to tilt toward a hike in June, but how many will be driven almost entirely by developments around Hormuz and the resulting inflation pass-through."

"While we still look for one hike this year, it may occur later than our baseline of June. The bar for a sustained hiking cycle remains high."

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