Synopsis:

Both Morgan Stanley and BofA expect the BoE to hold rates at 4.50% during Thursday’s March policy meeting, with a split vote but no immediate policy shift. Morgan Stanley sees a 6-3 vote, while BofA expects a 7-2 vote, with Dhingra and Mann voting for a cut. While the gradual and careful approach remains in place, recent hawkish data, inflation forecasts, and shifting dovish members turning more neutral suggest that the BoE will stick to its cautious stance. Both banks continue to expect the first rate cut in May.

Key Points:

1️⃣ BoE Expected to Hold at 4.50%, With a Split Vote 🏦

• Morgan Stanley: 6-3 vote for no change.
• BofA: 7-2 vote, with Dhingra & Mann voting for a cut.

2️⃣ Dovish Members Turning More Neutral 🔄

• Taylor and Ramsden, previously leaning dovish, now more neutral, supporting a gradual approach.
• No urgent shift in policy expected despite market pricing for cuts.

3️⃣ "Gradual and Careful" Policy Remains the Baseline 📉

• BoE added "careful" to its February statement, signaling uncertainty.
• Hawkish inflation forecast revisions & supply-driven growth weakness reinforce the hold decision.

4️⃣ Next Rate Cut Still Expected in May 📆

• Morgan Stanley & BofA still forecast the first rate cut in May.
• Near-term risks skew hawkish, but easing is still expected later in 2025.

Conclusion:

Both Morgan Stanley and BofA expect the BoE to hold at 4.50%, with a split vote but no urgency to shift policy. The cautious approach remains intact, with dovish members turning neutral and inflation concerns keeping cuts on hold for now. The first rate cut is still expected in May, but hawkish near-term risks persist.