We now expect the Bank of England MPC to vote to keep rates on hold at 3.75% at next week’s meeting. Money markets are pricing a small probability of a 25bp rate increase. At the IMF Spring Meetings, Governor Bailey stressed that the energy shock makes policy decisions “very difficult” and that the Bank is “not going to rush to judgements”. It suggests the Governor bides his time as long as energy and rates markets stay relatively calm. Figure 1 indeed shows that rate expectations are fully driven by energy prices. This indicates that, as of now, the UK’s money market rate forecasts are essentially just global energy ... (full story)