MNI BOE Review - February 2024: No more hawkish bias

• The MPC removed its tightening bias from its forward guidance. But there was also a more subtle tweak to the “extended period of time” language which we think makes it less forward-looking than before.
• The inflation forecasts show a near-term drop below the 2% target on energy effects, before inflation returns above 2% by the end of 2024 - and stays above 2% longer than in the November forecasts (under market rates).
• However, the constant rate inflation forecasts show inflation sharply missing the target in 2/3-years which indicates the MPC is strongly implying that cuts will be needed - but not as much as the market is pricing.
• The repeated line from the press conference was that it is no longer about whether rates are restrictive enough, but how long they need to remain restrictive for.
• The MNI Markets team assigns subjective probabilities of 25% to a first cut in May, 40% to a first cut in June and 30% to a first cut in August. We discuss our rationale in the PDF.

MNI BoE Review - Feb24.pdf