The Monetary Policy Committee (MPC) is expected to vote 8-1 to maintain the interest rate at 5.25%, with a possibility of more than one dissenter at the May meeting. Growth and inflation projections are anticipated to remain largely unchanged. The rate decision is scheduled to be announced at 11:00 GMT, followed by a press conference at 11:30 GMT.

As major central banks worldwide grapple with similar economic challenges, the Bank of England (BoE) is expected to maintain its current monetary policy stance, with investors anticipating some dovish adjustments. According to a recent poll of economists, the Monetary Policy Committee (MPC) is predicted to keep the main lending rate steady at 5.25% when it announces its decision on Thursday. The consensus is an 8-1 vote in favor of no change.

Since the last meeting, there has been increasing discourse among MPC members favoring a more dovish approach. JP Morgan’s Allan Monk suggests that Dave Ramsden might join Swati Dhingra in dissenting for a rate cut, leading to a closer 7-2 vote. Monk stated, “Even that is not entirely clear, but it does seem the natural implication of his recent speech. Although other dovish dissent is possible, it’s not obvious who that would come from or indeed why a switch should happen now.”

Citi’s Benjamin Nabarro predicts a shift in policy language, expecting a “further softening of the previous prior that inflationary persistence remains evident” and an “associated hardening of the cutting bias.”

The BoE’s Monetary Policy Report (MPR), to be published alongside the rate decision, will include revised quarterly economic forecasts.

Inflation: Barclays anticipates the near-term inflation path to remain largely unchanged, with potential downward revisions of about 20 basis points in the longer term.

Growth: The growth outlook may see a material upgrade for Q1, with expectations of a 0.4% quarter-on-quarter increase. However, Barclays notes that data revisions to 2023 and a lower-than-expected Q4 have reduced the GDP level by 0.4% from previous expectations.

Labour Market: The labour market remains a central concern for the MPC. Jonathan Haskel highlighted the importance of various indicators such as vacancies, redundancies, and hiring and firing intentions. Recent data showed regular private sector average weekly earnings growth was on track with MPC expectations, despite month-to-month volatility.

The market currently expects just under two rate cuts this year, with rates slightly above 4% by the end of 2025. This is a significant shift from February, when four cuts were anticipated for this year, with an end-2025 level of 3.5%.

Morgan Stanley’s Bruna Skarica notes that even if the MPC wanted to signal a possible June start to the cutting cycle, data would need to support such a move. She emphasizes that the BoE’s Q2 2024 inflation and pay projections will be critical in determining near-term actions. Should April inflation approach the 2% target, Deputy Governor Broadbent might confirm a June rate cut in his likely final speech as an MPC member.

As the BoE prepares to announce its rate decision, the central bank is expected to maintain its current policy rate while keeping the door open for potential rate cuts in the summer. Investors and analysts will closely watch the accompanying Monetary Policy Report and press conference for signals on future policy direction. The market’s focus will also be on upcoming inflation and wage growth data, which will play a crucial role in shaping the BoE’s decisions in the coming months.