As widely expected, the BoE's February MPC meeting opted to deliver a tenth successive hike in Bank Rate. A 50 basis point increase matched the market consensus and put the benchmark rate at 4.0 percent, its highest level since October 2008. It also brings the cumulative tightening to date to some 390 basis points. However, in line with December, the latest vote was far from unanimous as both the two main doves, Swati Dhingra and Silvana Tenreyro, continued to push for no change. Hawk Catherine Mann, who wanted a full 75 basis point rise last time, joined with the other six MPC members preferring 50 basis points. Nonetheless, the split again underscores the very mixed views on where the economy goes from here.

Active QT continues and the bank indicated that as of the start of the month, the total stock of QE assets was £838 billion, comprising £826 billion of UK government bond purchases and £11.5 billion of sterling non-financial investment-grade corporate bond purchases. Sales will proceed as previously outlined.

The bank acknowledged that domestic inflationary pressures had been firmer than expected with both private sector regular pay growth and services CPI inflation notably higher than forecast in the November Monetary Policy Report (MPR). Some survey indicators of wage growth had eased, but the labour market remained tight.

In the November MPR the market-implied path for Bank Rate put the peak at around 5.25 percent in the third quarter of this year, a level that the bank made plain it thought to be too high. The new path tops out at 4.5 percent in mid-year and falls to just over 3.25 percent in three years' time. This sees CPI inflation slide below its 2 percent target over the medium-term, implicitly suggesting that another 50 basis points on Bank Rate would be too aggressive. That said, the risks to the inflation outlook in the medium term were seen to be both large and asymmetric, with a skew towards greater persistence.

For the real economy, the record 2-year recession has been replaced by a notably shallower decline and GDP is now projected to fall only slightly throughout 2023 and the first quarter of 2024. Although the forecast is still consistent with the technical definition of a recession, by the end of the projection total output is expected to be up almost 1 percent on the year. The growth estimate for last quarter has been revised up from a quarterly decline of 0.1 percent to a rise of 0.1 percent.

On balance, today's statement and minutes are probably rather more dovish than expected and may well mean that the latest 50 basis point hike will be the last of the jumbo-sized tightenings that began back in August. If nothing else, the still wide splits over the need to raise rates, let alone the size of any hike, will make securing another 50 basis point move in March tricky. The economy is still expected to be weak and at least some leading inflation indicators are moving down. Nonetheless, with the labour market still tight and wage growth currently well above anything compatible with the 2 percent inflation target, a smaller 25 basis point move next month is a real possibility. Indeed, the outcome of ongoing strikes over pay across a large number of industries will play an important role in just how much higher Bank Rate has to go. Should the government cave in, market expectations for a cut in key rates before year-end could prove well wide of the mark. In any event, it will be the data that determine what happens next.

The BoE is expected to hold its rate-hike pace at 50 basis points with, however, an outside chance for a shift lower to 25 points.

The Monetary Policy Committee (MPC) of the Bank of England (BoE) comprises nine experts, five of which are senior central bank executives and the other four are external members appointed by the Chancellor of the Exchequer. The MPC previously announced its monetary policy with regard to interest rates and any unconventional policy instruments every month but this was changed when the meeting schedule was truncated to eight a year in 2016. With a view to enhancing policy transparency, as of August 2015 the minutes of the MPC's deliberations, which indicate how each member voted, have been released alongside the policy announcement. Forward guidance was introduced in August 2013 but since then its framework has become increasingly qualitative and now provides only limited information about where policy might be headed.

The Bank of England determines interest rate policy at their Monetary Policy Committee meetings. These meetings currently occur during the first week of each month and are an influential event for the markets. Prior to each meeting, market participants speculate about the possibility of a change in the benchmark Bank Rate or unconventional monetary instruments. The MPC may or may not issue a post-meeting statement explaining its decisions in addition to the discussion’s minutes which, since August 2015, have been released alongside the policy announcement. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching. In the middle month of each quarter, the Bank publishes its Inflation Report, which provides a detailed analysis of economic conditions and the prospects for economic growth and inflation agreed by the MPC. This is now made available at the same time as the policy announcement and release of the minutes.

The Bank's monetary policy objective is to deliver price stability - low inflation - and, subject to that, to support the Government's economic objectives including those for growth and employment. A remit announced by the Chancellor in March 2013 hinted that the real economy may have a larger say in policy decisions going forward. Price stability is defined by the Government's medium-term inflation target of 2 percent, as measured by the annual change in the consumer price index. The foundation of the Bank's policy is the recognition of role of price stability in achieving economic stability more generally, and in providing the right conditions for sustainable growth in output and employment. The Government's inflation target is announced each year by the Chancellor of the Exchequer in the annual Budget statement.

As in the United States, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on British markets - and to some extent those in Europe - can be dramatic and far-reaching. The interest rate set by the Bank of England, serves as a benchmark for all other rates. A change in the rate translates directly through to all other interest rates from gilts (fixed interest government securities named after the paper on which they were once printed) to mortgage loans.

The Bank of England sets an interest rate (Bank Rate) at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.