If it weren’t for Brexit, MPC would have contemplated a rate hike at this meeting – Rabobank

“As expected, the Bank of England MPC kept policy on hold at today’s meeting. The vote was unanimous,” note Rabobank analysts.

Key quotes

“The main takeaway from the minutes was that the MPC believes the output gap has closed and that the economy will run hot at the end of 2019. Even with three hikes priced in over the 3-year horizon, the MPC expects CPI inflation to remain above-target before eventually reaching 2% by the end of 2021.”

“In other words: if it weren’t for Brexit and the uncertainty around it, the MPC would have seriously contemplated a rate hike at this meeting.”

“If, if, if… Virtually all questions in the press conference have been related to ‘what ifs’ for the various Brexit scenarios. Governor Carney replied by stressing that the Bank could respond to Brexit with either rates or cuts, but that this will depend on the impact of Brexit on demand, supply and the exchange rate – leaving the market none the wiser.”

“As we highlighted in our preview, the MPC is waiting for greater clarity on Brexit. Even though this was still a relatively hawkish briefing, the market therefore shrugged, and showed that it is much more sensitive to news on Brexit.  We continue to forecast a rate hike to 1.00% in May.”