The hawkish tone of February’s UK MPC minutes suggests that the chances of a near-term interest rate rise are higher than previously thought. Indeed, we would now put the chances of a May hike at pretty much 50/50. However, the minutes made it clear that the decision will depend on how the economic data pan out over the next few weeks. So if the recovery struggles as we expect, a near-term tightening might yet be avoided.
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