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Expectations are for the BoE to deliver a 25 basis points hike in the Base Rate to 4.5%, according to 55 out of 56 analysts surveyed by Reuters. Market pricing concurs, with 25 basis points priced at around 85%. Dovish dissent from Tenreyro and Dhingra is expected once again which would mean a 7-2 vote split. Focus will be on any hints over a potential pause in the current hiking cycle.

At the prior meeting, the BoE raised the Base Rate by 25 basis points to 4.25%. The Monetary Policy Committee (MPC) chose to keep forward guidance on rates, noting if there were evidence of more persistent pressures, further tightening would be required. 

Recent data has leaned hawkishly, with year-on-year Consumer Price Index printing at 10.1%, which was 0.9 percentage points above the MPC's forecast, and the core rate at 6.2% vs. the MPC's projection of 5.8%. In the labour market, headline earnings growth advanced to 6.6% from 6.5%, employment growth in February stood at 169k, while the unemployment rate rose to 3.8% from 3.7% in the three months to February. More timely survey data showed the UK Composite PMI rising to 54.9 from 52.2 thanks to the strong performance of the services sector.

Regarding recent rhetoric from MPC members, Governor Bailey noted that if signs of persistent inflationary pressures become evident, further monetary tightening would be required. Bailey added that with the FPC focussing on the financial system, the MPC can focus on returning inflation to target. Chief Economist Pill reaffirmed that there is a lot of policy in the pipeline still to come through. Meanwhile, MPC hawk Mann mentioned that financial conditions have loosened in the UK, making it difficult for the BoE to control inflation in H2 2023. On the dovish side, Tenreyro has cautioned that the impact of previous rate hikes is yet to be fully seen and that the MPC may have already tightened a bit too much.

With expectations of a 25 basis points hike in the Base Rate to 4.5%, the focus will be on whether the MPC retains its current language on forward guidance or adjusts it to indicate a potential pause at the June meeting. Market pricing puts the terminal rate at around 4.82%, which would imply another 25 basis points hike beyond next week and a circa 28% chance of another thereafter.

For the accompanying macro projections, Oxford Economics expects an upgrade to near-term growth and a downgrade to near-term inflation, with the latter a by-product of "lower energy prices, rising slack, as well as a higher yield curve". Over the medium-term, inflation is expected to be materially below 2% in 2024 and 2025.