The Bank of England kept the base rate (at 0.50%) as well as the asset purchase target (at GBP200bn) unchanged, as expected by almost all forecasters in the market. We will have to wait until 18 May for the Minutes to see the exact voting result. Our guess is that the number of hawks is declining.
The UK yield curve is currently very flat in the front-end with the first 25bp hike not priced before December and the next in May 2012. The MPC might wait until early 2012 before its tightening monetary policy.
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