In Brief:

• Majority of analysts expect a 50bp rate hike in February; Minority expect 25bp

• If the Bank hikes by 50bp, voting likely to be 6-1-2 (6 for 50bp, 1 for 25bp, 2 for unch) or perhaps 7-2

• New quarterly MPR (Monetary Policy Report) to be published. Analysts expect:

o Increase in GDP growth in 2023 (shallower recession)

o Inflation lower in 2023 but 2024 and 2025 revised closer to 2% level

o Higher 2yr & 3yr inflation forecast given large decrease in market rates since November MPR (prior 2yr was 1.82% and 3yr at 0.41%)

• Analysts expect MPC to highlight some further hikes may be needed but no push back on mkt pricing

• Markets pricing ~46bp hikes for Feb – ie 25bp hike plus 85% chance of additional 25bp (50bp total)

• OIS markets pricing another 25bp hike each in March and May to peak of around 4.50% by June

Street Views:

-Barclays: Expect a 50bp at the Feb meeting but the MPC to signal a stepdown to 25bp at the Mar meeting. The vote is expected to be seven members voting for 50bp, and two voting for unchanged rates. The MPC highlighting the resilient activity and inflationary persistence for its 50bp hike. Beyond Mar, a final 25bp in May would bring the terminal rate to 4.5%. On financial projections, expect a less gloomy picture than in November with a milder recession, a faster fall in inflation in 2023 but further years to be revised higher.

-Bank of America: Expect a 25bp hike at this meeting followed by another 25bp in Mar before the BoE pauses. Highlight the risk for a 50bp hike in Feb due to wage data which was higher than expected.

-CIBC: Expect to hike 25bp at this meeting as the MPR report will continue to show CPI undershoot from mid 2024 onwards. The MPC will highlight the lagged impact of past tightening, higher fixed rate mortgages and falling living standards as the reason to lower the pace of tightening. Highlights that the risk to their view comes from wage growth pressure and labour market supply

-Citi: Expect to hike 50bp at the Feb meeting with some risk of a 25bp surprise. MPR projections likely show 2y inflation closer to the 2% level enhancing the view that the BoE is close to pausing hikes. The peak in rates is likely to be reached in Mar at 4.25%.

-Deutsche: Expect a 50bp hike at the Feb meeting with 3 dissenters, 1 voting for 25bp while 2 vote for unchanged. 50bp is the most likely outcome at this meeting dues continued upward wage growth, service inflation that has strengthened, price pass-through higher than expected and better growth prospects than originally expected. Beyond Feb, see a decrease in the pace of tightening to 25bp with a terminal rate of 4.5%.

-Danske: Expect a 50bp hike at the Feb meeting followed by another 25bp in Mar. The 4.25% level reached in Mar would represent the peak in rate for this cycle. Risk for a 25bp rate hike in Feb is greater than what is presently priced in the market. Their call for 50bp at the Feb meeting due to a more resilient UK economy that originally projected plus the upside surprise in wage growth. MPR projections will likely show an improved economic outlook as market rates have dropped from 5.25% to 4.40%.

-Goldman Sachs: The most likely outcome from the Feb meeting is another 50bp = hike. Vote is likely to be 6- 1-2 with one member voting for 25bp while two vote for unchanged rates . Agrees with the view that headline inflation has now peaked while lower gas prices point to a quicker decline in inflation in 2023, the combination of strong wage growth pressure and service inflation picking up even further means that the MPR should project stronger inflation in 2025. Beyond Feb, see the pace of tightening reduced to 25bp until the terminal rate of 4.5% is reached in May.

-HSBC: Expect a 25bp hike at the Feb meeting although see the risk for a larger move. Vote is likely split along the lines of 3 votes for 50bp, 4 votes for 25bp and 2 votes for unchanged. Expect upward revisions to medium term inflation, the MPR likely still project an undershoot in inflation in future years.

-ING: Expect a 50bp hike at this meeting due to persistent wage pressure and service sector price inflation. Beyond Feb expect another 25bp hike in Mar to 4.25% before the BoE pauses. Vote split expected to be 6-1-2 in this scenario.

-JPM: Expect a 50bp hike in Feb and the MPC to indicate that more tightening is likely to follow. May hint that the pace of tightening will be reduced to 25bp at future meetings assuming wage growth slows. Vote likely 7-2 with 2 members voting for unchanged rates. Highlights that the BoE was counting on a recession and rising unemployment to moderate wage pressures and thereby inflation. If GDP is revised upward to show only a mild recession, this may not be enough to dampen inflationary pressure, hence the need to do 50bp at this meeting.

-Lloyds: Expect a 50bp hike in Feb. Highlight the higher wage settlements as potentially threatening to become a driver of domestic inflation as the reason the BoE needs to raise rates by 50bp at this meeting.

-Natwest: Expect a 50bp hike at this meeting. Vote likely 6-1-2 with the majority voting for 50bp, one member preferring 25bp while two others vote for unchanged. Expects a tone down of the forceful guidance and potentially hint at lowering the pace of hikes to 25bp at future meetings. A ‘dovish’ 50bp hike is largely priced into the market already.

Recent BoE Speakers:

Tenreyro (Super Dove): 11th November: Extremely challenging times for UK & global economies; high energy prices will have med-term disinflationary effects which needs to be balanced against 2nd round effects; policy should focus on inflation not offsetting moves in gilt yields or FX; most of impact on demand of tighter rates is yet to appear; we need to guard against over tightening policy; expects rates being held over 3% in 2023 would further reduce O/P; policy would have to loosen maybe in 2024 to prevent inflation falling below target; UK demand is likely to fall even if energy prices fall back; her vote for 25bps hike was risk management; seeing early signs UK labour market is loosening; the UK is likely to be in recession in Q4, mostly due to lower real incomes

Dhingra (Dove): 3 rd December: You see a much deeper/longer recession with rates being much higher; given that real wages are falling, it’s indicative that we’re not yet at a wage-price spiral point; those expecting further large rate hikes were not taking into account BOE surveys suggesting there will be falls in investment/employment in next 2 years

Cunliffe (No Known Bias): 19th October: Big LDI funds have got to the point where they could absorb, on average, a 200bps rise in yields; we did not run stress tests on LDIs; Mon Pol will do what is required as entrenched high inflation not good for system; we have confidence in the gilt market to set out QT programme; we did not want to be stuck supporting the Gilt mkt for longer than needed after mini-budget

Broadbent (No Known Bias): 3 rd November: Likely further BoE rate rises will be necessary

Bailey (Hawk): 19th January: UK inflation on track to fall sharply beginning in late Spring 2023; labour market risk adds to inflation; we see a long but shallow recession for UK; no target for peak in rates; not endorsing 4.5% peak but did not comment on market being out of line in December

Pill (Hawk): 9 th January: Potential for UK inflation to prove more persistent; will have significant impact on my Mon Pol position in coming months; sees risks form higher gas prices; tight labour market and goods market bottlenecks; no single smoking gun of inflation persistence; rise in policy rates to current rates can be seen as significant progress in normalisation; MPC will respond forcefully if needed; starting to see labour market indicators turn and may reduce inflation risk; BoE must ensure any self-sustaining momentum in inflation is removed from the system by constraining demand

Ramsden (Hawk): 24th November: My bias to towards further tightening but it depends on the economy; would consider cutting rates if the economy pans out differently and inflation persistence stops being a concern; favours a watchful, responsive approach to policy setting; aren’t yet confident domestically generated inflation pressures have started easing; encouraging that survey & mkt based inflation expectation measures have eased; the MPC need to take necessary steps on monetary policy to return inflation to the 2% target; the government’s Autumn statement will push down on activity & inflation; possible inflation comes down more quickly next year; the impact of higher rates may take longer to come through & have a bigger impact; there’s a range of views on the MPC over inflation expectations developments; UK reputation took a hit over Gilts, will have to work across all UK policy-making areas to restore reputation; size of Nov rate hike reflected accumulated evidence of inflation persistence; energy support boosted med-term demand and pointed to bigger Nov rate rise

Haskel (Super Hawk): 11th November: Important for Mon Pol to stand firm against persistent inflation pressure; recent indications suggest UK slowing down; signs of slowdown do not imply less tightening; concern is price increases become embedded Mon Pol will be tighter for longer; supply side poses risk of persistent pressure

Mann (Super Hawk): 12th January: Productivity critical to my policy choices; underlying UK inflation dynamic looks pretty robust; UK households and businesses anticipate 4% inflation in the years ahead; must not let inflation expectations drift; inflation expectations are the key variable for policy; focus is more on firms pricing power rather than labour mkt; on risk of over-tightening, says ‘we are not there yet