Ian McCafferty: twice hawk, twice fail

Bank of England's (BOE), only vocal hawk disappeared today again. Ian McCafferty dropped his call for immediate rate hike and Bank of England's Monetary Policy Committee (MPC) is united again in their vote. 9-0 in favor of keeping monetary policy unchanged.

Pound is down but only marginally. Pound was already trading 1.459 area before the policy announcement and compared to that Pound is currently trading at just 15 more pips down. While the hawks disappearance wasn't entirely expected, market was largely expecting the announcements and communications to be dovish.

Bank of England's (BOE) latest forecast endorsed the view that rates will not rise for at least another year. Central Bank will reach its inflation target of 2%, only in first quarter of 2018, and inflation is likely to remain below 1%, throughout 2016.

Mr. McCafferty judged pick up in wage growth could be more muted than he had expected.

Growth also got revised further. It is now expected that UK economy would grow only by 2.2% this year compared to 2.5% predicted during November last year. Growth in 2017 expected to be 2.4%, revised down from 2.7%.

Though Pound is down almost 90 pips from high, it is down as we write just about 20 pips from pre to post policy as it was expected to be dovish and weak Dollar.

We, in the short term still expect Pound to gain another 300-350 pips against Dollar.