Bank of England: There will be fewer rate hikes than previously thought - Danske Bank

According to analysts from Danske Bank, after today’s decision and reports, a rate hike from the Bank of England remains “alive” but the timing is data dependent.

Key Quotes:

“The Bank of England decided not to hike the Bank Rate at this meeting (vote count unchanged 7-2, a bit dovish as some had thought it might be 6-3), as economic indicators surprised to the downside.”

“The seven members voting for staying on hold thought that it would be good to see ‘how the data unfold over the coming months to discern whether the softness in Q1 might persist’, as the ‘cost of waiting was likely modest’, supporting our view that the hiking cycle is postponed, not cancel led, but that there will be fewer rate hikes than previously thought.”

“We stick to our call with one hike in H2 18 and one in 2019 with the next hike likely in August. That said, the probability of August has declined slightly, as we only get three months more data in August, which may not be enough for the majority of the BoE members.”

“Timing of the next BoE rate hike remains highly data dependent and we see market pricing as fair for now, with risks skewed to the upside for UK yields in the coming months, if we are right in our call that the BoE will hike the Bank Rate in August.”