Post #16190

The UK Is Positioned To Hike (But Surprised Dovish) Yesterday's BoE hold at 3.75% was actually more dovish than expected — an 8-1 split with only Pill dissenting — but the broader dollar weakness from the Japan intervention drama is doing the heavy lifting here. Bailey framed the oil shock carefully, distinguishing it from 2022: the energy increase is smaller, policy started more restrictive, and the labor market is weaker. His key line — if the shock is "short-lived or the economy weaker, policy should place more weight on avoiding unnecessary contraction" — was a clear signal the BoE isn't rushing to hike. Markets have dialed back the hawkish BoE narrative. The 2-3 dissents some expected never materialized. The BoE published three scenarios depending on how long the war lasts, essentially admitting they're hedging every outcome. - Alan