We maintain our call for a 25bps rate cut by BOE in May - TD Securities

The Bank of England (BOE) on Thursday left its policy rate on hold today at 0.75%, as expected, but surprised markets with a 7-2 vote split. 

Essentially, there wasn't a single additional vote for a rate cut compared to November and December, which was somewhat surprising and made the BOE look hawkish, as a number of policymakers made dovish comments earlier this month,  

Even so, analysts at TD Securities have maintained their call for a rate cut in May, as they think  the decision to remain on hold was mainly based on the premise that the bounce in the survey data will lead to a substantial improvement in the hard data.

Key quotes

We're sceptical, however, that we've seen the end of business uncertainty due to Brexit, with the battle around trade negotiations set to start flaring up as soon as next week, with a major speech from PM Johnson as well as the publication of negotiating priorities by the EU. So any bounce in business sentiment may be fairly short-lived. 

Furthermore, we see substantial downside risks to the BoE's near-term inflation forecasts. So that should set up for further easing in May, with sentiment falling back again and inflation disappointing.