BoE decision - Analysts react

"The MPC appears comfortable with its current balanced stance and will likely want to see some diverging data before changing its rhetoric. It nonetheless noted that the outlook for activity had improved, globally and in the UK, while inflationary pressures appear to have eased somewhat relative to the November Inflation Report. This takes some pressure off the MPC to act in the short-term. [...] "the Bank’s interpretation of the Autumn Statement is that new fiscal plans are less of an headwind to domestic demand. While we agree with the idea that a smoother deficit reduction path is less restrictive, we highlight that the size and the change in the structural deficit are still broadly similar meaning that the restrictive stance of the fiscal policy remains, even as growth is expected to slow." - Barclays Research

The MPC reiterated that the FX-induced overshoot in inflation will “ultimately prove temporary” and that fully offsetting it would require lower output and higher unemployment. [...] The Committee discussed the rise in long term interest rates since November. It noted the rise was global and reflects in part expectations of a fiscal stimulus in the US. The Committee was sanguine about the latter, saying if indeed a looser US fiscal policy materialised it would “help to underpin the slightly greater momentum in the global economy … and reduce further the remaining risk of persistently low inflation”. However, the MPC said that while “the central outlook for the global economy had probably improved …, fragilities had become more evident and policy uncertainty had increased.” It pointed in particular to risks in China (where it said vulnerability to capital outflows had increased) and the euro area (where risks surrounding the banking system remained elevated)." - UniCredit Research

“The chances of a wage-price spiral developing are very low, while the experience of recent years suggests that the MPC is likely to set the bar for tightening policy fairly high, judging that the risks of premature tightening would be greater than those arising from waiting too long. We continue to expect a lengthy period of monetary policy inaction, with the Bank rate remaining at 0.25% until well into 2019 and no further quantitative easing (QE) once the current programmes of gilt and corporate bond purchases have been completed.” - EY Item Club

"There are a number of other reasons why the MPC should not feel compelled to follow the Fed and raise rates soon. For a start, while the US looks set to receive a sizeable fiscal stimulus over the next year or so, the UK is still being subjected to austerity, with Chancellor Hammond’s Autumn Statement merely lessening the pace of fiscal tightening rather than resulting in an outright loosening. Meanwhile, we expect the UK economy to slow next year, partly reflecting the impact of higher inflation eating into real income growth. And finally, the UK economy is perhaps less obviously close to full capacity as in the US." - Capital Economics