While the Fed seems to be on track to begin raising rates in September, there are growing risks that BoE policy could remain unchanged beyond this year, as recent trade-weighted currency strength, combined with lower energy prices, adds further downward pressure to UK inflation.
BoE rhetoric has recently indicated increasing division within the Monetary Policy Committee (MPC) and there will be little to change this perception over the next month, according to Barcalys research.
Indeed, with the dissolution of parliament on 30 March, the BoE is now bound by "purdah" rules, which prevent central bank communication until the final election results are known. In a notably different tone to a relatively upbeat BoE February Inflation Report, BoE Chief Economist Andy Haldane indicated in a 19 March speech the prospect of rate cuts if low inflation persists, placing himself firmly at the more dovish end of the MPC.
Taking a more neutral tone, Deputy BoE Governor Ben Broadbent said in a 27 March speech that while the MPC must be watchful of low inflation with policy at the effective lower bound, the chances of sustained deflation in the UK are low.
