MUFG analysts use a textual sentiment framework on the latest Bank of England (BoE) decision, finding a hawkish hold in Monetary Policy Committee (MPC) member contributions but a more balanced tone from Governor Bailey’s press conference. The Committee remains modestly hawkish overall, yet officials push back on imminent rate hike expectations, leaving GBP supported but with limited upside as restrictive policy is maintained.

BoE hawkish hold but balanced tone

"The latest member contributions point to a hawkish hold stance. While members acknowledged softer growth dynamics and a gradually easing inflation backdrop, members remained focused on inflation persistence, second-round effects and the potential inflationary consequences of higher energy prices and geopolitical risks."

"Individual member scoring highlights a still-divided Committee. Catherine Mann (80 – Hawkish Conviction), Huw Pill (71) and Megan Greene (65) remain firmly in hawkish conviction territory, while Swati Dhingra (-28) and Alan Taylor (-33) continue to represent the dovish wing. The remaining members sit close to neutral, leaving the Committee modestly hawkish overall."

"Importantly, however, the press conference delivered a more balanced message than the written statement. Our framework scored the member contributions at 23.3 versus 17.0 (where -100 represents the strongest dovish conviction and 100 represent the strongest hawkish conviction) for the press conference. Although policymakers reinforced concerns around energy prices and second-round effects, Governor Bailey pushed back against any interpretation that the Bank was preparing to raise rates, explicitly stating that markets should not leave the meeting believing the MPC was "edging towards a hike"."

"The key message from the sentiment analysis is that policymakers remain concerned about inflation risks but are not signalling an imminent tightening. Instead, the MPC continues to favour the current restrictive stance while assessing whether recent inflation pressures prove persistent. For GBP, the communication remains supportive, but the deliberate pushback against rate hike expectations limits the scope for upside."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)