Highlights:

• As widely expected, the Bank of England (BoE) raised Bank Rate by 25 bps to 4.5% today. The decision was taken by a 7-2 majority vote. For the fourth meeting in a row, two members (Tenreyro and Dhingra) voted to leave rates unchanged. 
• The decision follows upside surprises in inflation and wage data. The BoE repeated its data-driven forward guidance, stating "If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required".
• The Bank dropped forecasting a recession. Model results see CPI inflation to fall to 1.1% in two years’ time if Bank Rate followed the market path (expecting first cuts by the end of the year), and to 0.7% in Q2 2025 if Bank Rate were held constant at 4.5%. 
• While we expect headline inflation to drop quite significantly with the April data release, core inflation as well as wage growth could prove sticky. We therefore see another hike in the next meeting now more likely than not. Even a second one cannot be excluded although weakness in global growth in H2 might well prevent this.
   

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