James Rossiter, Senior Global Strategist at TD Securities, notes that as expected, the MPC voted unanimously to keep BoE policy on hold while the minutes stressed that the MPC would look through any referendum-related data volatility over the first half of 2016. Key Quotes “There was little surprise in today’s MPC statement & minutes, with the committee generally viewing things as moving along as expected in their February forecast. The MPC acknowledged an economy growing near trend, but noted that wage pressures remain somewhat subdued (we disagree). Perhaps the most important part of the release was the acknowledgement that data would remain choppy over the first half of the year as the referendum has effects on the exchange rate and broader uncertainty (especially for business spending). The MPC stressed that they would look through noise, meaning this will be a committee that is less data-dependent than normal. This sounds like an MPC trying to temper expectations of a cut. While the MPC did hypothesise about possible implications of a UK vote to leave the EU, it generally lined up with our own macro view of that scenario, and was light on the details. The Bank of England will likely continue to shy away from any big policy statements in the two months left before the EU Referendum. Towards a 2016 Hike? We continued to believe that if the UK votes to remain in the EU in the upcoming referendum, the Bank of England will be in a position to hike Bank Rate in November this year (with risks tilted somewhat into 2017). Sterling’s depreciation since November 2015 will also continue to exert pressure on imported consumer prices. While the MPC has acknowledged that some of this depreciation is linked to the upcoming EU Referendum (and thus sterling could unwind under a Remain win), firms are already facing higher imported costs, and will not absorb this all in their margins, leading to some inflationary pressures over coming months. Finally, if the UK votes to remain in the EU, we would expect a bounce-back in growth in 2016H2. Thus any uncertainty effects seen (in particular) in 2016Q2 will be unwound quickly, boosting growth significantly (albeit temporarily), and we agree with the MPC placing less weight on current data. But once the referendum is out of the way, stronger wages, weaker productivity, imported price pressures, and a bounce in growth should lay the groundwork for a hike in Bank Rate in Nov 2016.” For more information, read our latest forex news.