In voting for no change, it was noted in the inflation report that market rate forecasts are now pointing to lift off later than expected in 2018. However, the flatness of the yield curve makes picking a specific month challenging. The market implied rate is now for the bank rate to reach 1.1 percent by the first quarter of 2019.
"Low inflation, recent weakening of wage growth, growing concerns about the global economy and the Brexit risk will keep the dovish BoE on hold until at least November in our view. But this is much earlier than the path currently implied by market indicators," said Kallum Pickering, senior U.K. economist at Berenberg.
Despite pointing to a tighter U.K. labor market, and expressing the view there is now less slack in the economy, the committee observed wage growth and labor costs have been weaker than expected. This has happened even as domestic U.K. household and business sentiment had been robust.