BoE Hawks Remain Firm Despite Softer Growth, Easing Inflation

The Bank of England's (BoE) recent decision has been analyzed by MUFG analysts using a textual sentiment framework, revealing a hawkish hold stance among Monetary Policy Committee (MPC) members. Despite acknowledging softer growth dynamics and easing inflation backdrop, members focused on inflation persistence, second-round effects, and the potential consequences of higher energy prices and geopolitical risks.

The analysis highlights a still-divided Committee, with some members firmly in hawkish conviction territory while others represent the dovish wing. Catherine Mann (80, Hawkish Conviction), Huw Pill (71), and Megan Greene (65) remain hawkish, whereas Swati Dhingra (-28) and Alan Taylor (-33) are dovish. The remaining members sit close to neutral.

Notably, the press conference delivered a more balanced message than the written statement. Governor Bailey pushed back against any interpretation that the Bank was preparing to raise rates, stating that markets should not leave the meeting believing the MPC was 'edging towards a hike'. Policymakers reinforced concerns around energy prices and second-round effects but maintained a restrictive stance.

The key takeaway from the sentiment analysis is that policymakers remain concerned about inflation risks but are signaling no imminent tightening. The MPC continues to favor the current restrictive policy while assessing whether recent inflation pressures prove persistent. For the British Pound (GBP), the communication remains supportive, but the pushback against rate hike expectations limits the scope for upside.