Initial reaction to the BoE is hawkish, given the uptick in the Bank’s inflation projections following the Budget, before FI markets retraces the move.

• Governor Bailey noted that "we can't cut interest rates too quickly or by too much. But if the economy evolves as we expect it's likely that interest rates will continue to fall gradually from here."
• The continued alluding to further cuts limits the hawkish reaction.
• What’s more, only Mann provided hawkish dissent. We suggested as many as 3 could vote that way, so the outcome avoided the most viable hawkish scenario.
• Gilt futures to fresh session lows at 92.55 before a recovery to pre-decision levels around 93.00.
• Initial support at yesterday’s low (92.53) untested.
• Yields 1-3bp higher on the day, curve sees light bear flattening.
• SONIA futures -2.5 to +6.0 through the blues, moving in a similar manner to gilts.
• BoE dated OIS prices ~4bp of cuts through December vs the 7-8bp into the BoE decision.