BoE: Hawkish hold under energy shock – Rabobank

101 finance2026/03/19 15:15

By:101 finance

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Rabobank’s Senior Macro Strategist Stefan Koopman notes that the Bank of England (BoE) kept Bank Rate at 3.75% but adopted a distinctly hawkish tone as a renewed energy shock lifts inflation projections. The Monetary Policy Committee (MPC) is seen as “ready to act”, with Koopman now forecasting a single 25bp hike, potentially in April, while warning that tightening into weak UK demand risks a policy mistake.

Hawkish hold as inflation risks rise

"Given the developments of the past three weeks, the Bank of England MPC’s decision to hold Bank Rate at 3.75% was no surprise. The minutes show that the energy crisis is now dominating the policy debate, prompting policy makers to shift their focus toward inflation persistence and away from signs of a weakening labour market. Today’s communication suggests a move from treating inflation as an endogenous risk to viewing it as an exogenous one, a shift that shows the Bank’s monetary policy is in dire straits."

"If markets are right, policy would therefore become even more contractionary, on top of the squeeze already generated by the energy-driven terms-of-trade shock. This implies a further compression of demand at a time when the economy can least afford it, and it would also rekindle the familiar fiscal narratives that are bearish for UK assets."

"Even so, this is an MPC that is not prepared to fully look through this supply shock, except in the case of a very short-lived conflict, which is not our team’s base case. We have therefore now included one 25bp hike in our forecast, possibly as soon as April."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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