BoE struck a hawkish tone - ANZ

Analysts at ANZ explained that the Bank of England struck a hawkish tone noting that monetary policy will “need to be tightened somewhat earlier and by a somewhat greater extent” compared to November. 

Key Quotes:

"In the accompanying inflation report it upgraded its growth and inflation forecast. It believes in broad-based global growth, and a rotation from domestic consumption towards external demand and investment. It sees very little economic slack with the pace of potential growth modest, and with demand outstripping potential supply, believes domestic inflationary pressures will continue to build while energy and import price pressures dissipate. The GBP spiked but fell back; UK 10-year yields are up 7bp. Meanwhile the RBNZ MPS yesterday was taken dovishly by some but essentially was a case of “the more things change, the more they stay the same” with developments since November lowering the CPI track but not, importantly, the OCR projection.

A number of central bank speakers downplayed volatility overnight. BoE’s Carney said “there will be ups and downs in financial markets.” Bundesbank President Weidmann said policy makers should not “become unsettled by the decline in equity prices we have just witnessed”. The Fed’s Kaplan chimed in, noting “a little more volatility may be a healthy thing.” The Fed’s Dudley said that the stock market sell-off is “small potatoes” with no economic implications."