The Bank of England’s (BoE) Monetary policy Committee (MPC) is expected to keep policy unchanged at its May meeting, maintaining a ‘neutral’ policy bias relative to a market path of interest rates that, compared with February’s Inflation Report, envisages a more gradual withdrawal of monetary stimulus over the forecast horizon, Lloyds Bank reported

The MPC’s March decision saw policy left unchanged alongside the continuation of the ‘neutral’ policy bias in place since the November 2016 Inflation Report. Kristin Forbes’ early dissent in favour of an immediate increase in Bank Rate was explained by the absence of any meaningful weakening in activity – expected in the aftermath of the June 2016 EU referendum – alongside a worsening inflation outlook.

Policy-focused comments from other MPC members since March have been few and, on balance, do not trail a shift in the Committee’s overall stance. Dovish external member Gertjan Vlieghe in his speech in April still focused on downside risks to activity and noted a little sign of higher inflation other than that related to the pass-through of sterling’s weakness.

With Bank Rate expected to be maintained at 0.25 percent, other aspects of the MPC’s August 2016 package have mostly run their course. Purchases of both gilts and corporate bonds have reached their respective target stocks of GBP435 billion and GBP10 billion and expect no further expansion of either at this stage is expected.

"With the economy’s performance in 2017 Q1 beginning to bear out signs of weakness, we expect the MPC to be reluctant to tighten policy, inaction that is only likely to be encouraged by downside risks around the UK’s eventual departure from the EU," the report commented.