Rabobank’s Senior Macro Strategist Stefan Koopman expects the Bank of England’s (BoE) Monetary Policy Committee (MPC) to leave Bank Rate at 3.75% at the April meeting, maintaining its vigilant stance. Koopman notes weaker domestic demand, already restrictive policy and lower-than-expected energy prices, which may slightly reduce near-term inflation forecasts, while still anticipating one additional rate hike rather than a full renewed hiking cycle.

BoE seen on hold with cautious bias

“With markets having stabilised in recent weeks, we expect the MPC to keep Bank Rate unchanged at 3.75% at the April meeting and to reiterate the vigilant stance set out in March.”

“Even with the Strait of Hormuz still closed, energy prices have come in lower than expected.”

“If sustained, this would warrant a small downward revision to our near-term inflation forecast. A smaller inflation impulse reduces the risk of entrenched inflation, although the outlook is uncertain.”

“Even so, the domestic backdrop differs markedly from 2022: demand is considerably weaker, policy is already restrictive, and initial conditions are less conducive to second-round effects.”

“While we still expect one further rate hike to demonstrate vigilance, we continue to believe the bar for a renewed hiking cycle is high.”

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