**As seen in Risk In The Week report 03/16/25, get access now! cablefxm.co.uk
Back on February 6, Monetary Policy Committee voted to
reduce the Bank Rate by 25 basis points, from 4.75% to
4.5%. This decision was widely anticipated by markets and
economists.
The MPC's vote was not unanimous, as seven members
supported the 25 bps cut, while two members advocated for
a larger reduction of 50 bps, which would have brought the
rate to 4.25%. The committee noted that this adjustment
reflected "sufficient progress on disinflation in domestic
prices and wages," justifying a slight easing of monetary
policy restrictiveness. The BoE emphasized a "gradual and
careful approach" to further reductions, stating that
monetary policy would need to remain restrictive for a
sufficient duration to ensure inflation sustainably returns to
the 2% target in the medium term.
The BoE projected CPI inflation to rise to 2.8% in Q1 2025
and peak at 3% in Q1 2026 before gradually declining
toward the 2% target by 2027. The committee concluded
that it would assess the appropriate degree of monetary
policy restrictiveness at each future meeting, based on
evolving economic data.
Analysts at Rabobank expect the Bank of England MPC to
keep its policy rate unchanged at 4.50% at next week’s
meeting. This is almost fully priced in and aligns with market
consensus, they added. Rabo thinks the MPC is likely to
retain its guidance of gradual and careful easing. They
foresee three more 25bp rate cuts over the course of 2025,
bringing rates to 3.75%. Also, they think the UK isn’t
planning to reciprocate to Trump’s steel and aluminium
tariffs, hoping a passive approach will eventually earn
exemptions. Rabobank doesn't expect major fiscal changes
at the Spring Forecast, but the economic and fiscal news
since the Autumn Budget has been disappointing.
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