Time: 5pm – 6.30pm | Location: Bank of England
Minutes
Item 1 – Welcome
The Governor began the meeting by thanking attendees for joining and reminding participants of the purpose of these meetings. The Governor made clear that the MPC would be in listening mode, and that the meeting would be conducted in accordance with relevant competition and conduct laws, as per the terms of reference.
Item 2 – International developments
Market participants discussed the outlook for the global economy and developments in financial markets since the start of the year. A positive global growth picture continued to support risk sentiment, with evidence of some rotation into European and Asian assets. Geopolitical concerns remained a source of volatility, including in precious metals. There had been record corporate issuance in January and credit spreads remained tight reflecting strong demand. Market participants also discussed developments in AI, including its potential impact on productivity, capital investment, employment and prices – but acknowledged significant uncertainty around the timing and magnitude of these impacts, and across different countries and industries.
The discussion moved on to the emerging evidence of the impact of tariffs, trade policy uncertainty and trade diversion on global prices and their relevance to the UK, where market participants had a range of views. Market participants concluded by identifying relevant risks to the outlook, including the potential for a correction in asset valuations as well as continued fiscal sustainability pressures globally.
Item 3 – Domestic developments
Market participants shared their reactions to the February MPC meeting. Although the policy outcome was as expected, market participants highlighted the finely balanced nature of the vote split and associated communications as driving a dovish market reaction. This had seen market pricing for the near-term path of Bank Rate move lower. Considering the UK market curve further out, market participants highlighted the role of term premium in explaining the upward sloping nature of the yield curve towards the end of the forecast horizon, which they did not interpret as reflecting expectations for increases in Bank Rate. Market participants noted that term premium reflected a range of factors but was broadly characterised as remunerating investors for uncertainty.
Market participants expressed a range of opinions on the UK macroeconomic outlook, and on the prevailing degree of restrictiveness of monetary policy. Some market participants considered that signs of weaker growth and employment could have been driven by sources of uncertainty which may now be abating, and that wage inflation was at a level above that which they would consider consistent with achieving the inflation target. Other market participants assigned more weight to evidence of subdued economic growth, a rising unemployment rate, and other measures of labour market weakness. This range of views had led market participants to differing conclusions about the appropriate setting and path for Bank Rate.
Attendees
Market Participants Group (MPG) members
John Butler – Wellington Management
Andrew Law – Caxton Associates LLP
Fraser Lundie – Aviva Investors
Kunal Shah – Goldman Sachs
Gertjan Vlieghe – Millennium Capital Partners
Guy Winkworth – Barclays
Monetary Policy Committee (MPC) members
Andrew Bailey
Sarah Breeden
Swati Dhingra
Megan Greene
Clare Lombardelli
Catherine L Mann
Huw Pill
Dave Ramsden
Alan Taylor
Bank of England staff
Geoff Coppins
Arif Merali
Iain Ramsay
Andrea Rosen
Vicky Saporta
Fergal Shortall