Bank of England discuss ‘modest' policy tightening

The BoE's latest monetary policy report forecasts slightly slower 2021 growth with the Q4 2021 inflation forecast raised significantly, to double the 2% target. The monetary policy committee then predict the data dropping to 3.3% in Q3 2022, a 1.1% increase on May projections. Despite no imminent changes in stimulus, as widely expected, there was a slightly hawkish change in tone as a result, with the narrative shifting to suggest 'some modest tightening of monetary policy over the forecast period was likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term'. This will of course be subject to the strength of future growth and inflation data, and markets were largely unperturbed with small upward movements in the pound and gilt yields (yields move opposite to prices).