BoE Review: A Higher Bar For Action

The Bank of England held rates at 3.75% amid softer economic data and declining energy prices. Consequently, MUFG has abandoned its call for rate hikes this year, expecting a prolonged pause.

Key Takeaways

• 1.The BoE maintained interest rates at 3.75% with a 7-2 vote split, signaling a 'wait and see' stance as energy-driven inflation risks are balanced by slowing UK economic data.
• 2.MUFG has dropped its call for BoE interest rate hikes this year, citing softer UK labour market data and lower energy pricing following the US-Iran deal.

Table of Contents

• Macro view: No urgency to act – a prolonged hold is now our base case
• Changing our call: we no longer expect any tightening
• Markets view: GBP & UK yields to continue correcting lower
• US-Iran deal & softer UK data have helped to ease pressure on BoE to hike rates

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