Market commentary by Nomura following yesterday's BOE statement
- BOE comments were deliberately aimed at moving the market pricing from below to above a 50% chance of a rate hike in August
- Statement yesterday was tilted to the hawkish side on three counts
- The voting pattern saw a 6-3 split instead of 7-2 expected
- Committee remains optimistic that soft data in Q1 is temporary
- Revised guidance to reduce QE when rates reach a lower threshold - 1.50%
Despite the hawkish take from the central bank, my view is that it will still all come down to the data. There's still a lot of data points to come between now and August's meeting, so that will be the ultimate driver of rate hike expectations regardless of the voting pattern yesterday.
If economic data continues to disappoint and the market prices in a hike around 20-30% come August, there's no way the BOE will be able to hike unless they prime the market up for it despite lackluster data.
