BOE Policymakers Remain Hawkish but Rule Out Imminent Rate Hike

The Bank of England's latest policy decision has passed, and attention is now focused on the tone of its communication. MUFG Research analyzed the MPC Member Contributions and Governor Bailey's press conference Q&A using a textual sentiment framework to gauge policymakers' views on inflation risks and their potential impact on policy.

According to the analysis, individual member contributions point to a hawkish hold stance, with members remaining focused on inflation persistence despite softer growth dynamics. The results highlight a still-divided Committee, with some members firmly in hawkish conviction territory while others represent the dovish wing.

Catherine Mann's contribution stands out as a notable development, with her emphasizing the inflation risks stemming from heightened geopolitical uncertainty and energy-price volatility. However, the press conference delivered a more balanced message than the written statement, with Governor Bailey explicitly stating that markets should not leave the meeting believing the MPC was 'edging towards a hike'.

The key takeaway is that policymakers remain concerned about inflation risks but are not signaling an imminent tightening of policy. The Committee continues to favour the current restrictive stance while assessing whether recent inflation pressures prove persistent, with GBP communication remaining supportive but limited in its upside potential due to the pushback against rate hike expectations.