BoE Inflation Report confounded market fears of a more hawkish policy message

The revisions to the macro forecasts were uncontroversial. Inflation is a little higher this year to reflect the higher oil price but then is lower in the middle part of the forecast. 

The growth forecast was lowered slightly but so was the Bank's estimate of the potential output path so that the estimate of the output gap has not changed - still ½% of GDP. The tone of the report was less hawkish than some expected. 

"The MPC still appeared comfortable with the predicted market timing of the first rate increase in Q2/Q3 2016. However, its analysis of the labour market still points to an imminent pickup in earnings growth so we remain comfortable with our forecast of the first increase in Q1 2016 with a risk of later." wrote Brian Hilliard of Societe Generale