Economists at TD Securities discuss the Bank of England interest rate decision and its implications for the GBP/USD pair.

50 bps Hike (35%): Hawkish Guidance

The MPC hikes 50 bps and gives more hawkish guidance – signaling that Bank Rate will likely be raised further. The Committee makes clear that it is more seriously worried about the strength in the recent data, especially inflation and wages. GBP/USD 1.20%.

Base Case 25 bps (50%): Hawkish Language

The MPC hikes 25 bps and largely repeats its noncommittal guidance. That said, the language is more hawkish, with the MPC clearly getting worried about the strength of recent data prints, and the fact that inflation is coming down much more slowly than had been expected. The vote is 2-5-2 for 0/25/50, with Tenreyro and Dhingra voting for a hold while Mann and Haskel vote for a 50 bps hike. GBP/USD 0.50%.

Dovish Hike (15%): 25 bps, Pushing Back on Market Pricing

The MPC hikes 25 bps and reiterates guidance that ‘If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required’. The MPC actively pushes back against hawkish market pricing, potentially similar to in last November. The vote is 2-6-1 for 0/25/50, with Tenreyro and Dhingra continuing to vote for a hold while one of Mann or Haskel votes for a 50 bps hike. GBP/USD -0.25%.