MPC’s dovish hike starts to rein in market expectations

Though the MPC raised Bank Rate for the third successive meeting, March’s minutes revealed a clear change in tone. Growing concerns about the downside risks to growth from high inflation mean that we think another 25bps hike in the UK policy rate in May will be the last for a while.

What you will learn:

• For the past few months markets have ignored the MPC’s clear signalling about the future pace of rate hikes.
• But the repricing that followed Thursday’s announcement suggested that the message is finally starting to be taken on board.
• However, there’s still a wide gap to our own forecast, which shows Bank Rate ending 2022 at 1%.