Janus Henderson: UK MPC raises Bank rate

The MPC raised Bank rate from 0.25% to 0.5% as expected but the accompanying Inflation Report and minutes suggest a divided Committee and no consensus on the next policy move. The Inflation Report forecasts are mildly hawkish, indicating that three further quarter-point hikes will eventually be required to return inflation sustainably to target. However, the 7-2 split vote and a new sentence in the minutes hinting at renewed policy easing if Brexit negotiations go badly have encouraged a dovish market reaction. The view here is that there is modest upside risk to the Inflation Report’s near-term growth and inflation forecasts and a follow-up rate increase is possible next spring, assuming agreement on a Brexit transition.