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In case you were too fixated on the British High Court making it harder for the government to start the Brexit process, then you should also know that the Bank of England (BOE) has just printed its policy decision for the month of November as well as its latest quarterly inflation report.

Here are four takeaways you need to know:

No policy changes from the MPC

That’s right, the Monetary Policy Committee (MPC) unanimously kept its current policies in November!

  • Bank Rate remains at 0.25%
  • Purchases of investment-grade corporate bonds are still at £10 billion
  • Purchases of U.K. government bonds is kept at £60 billion to a total of £435 billion

Members Kristin Forbes and Ian McCafferty, who both voted against government bond purchases in August, decided to vote with the crowd this time as they believe that the economic costs of reversing the program aren’t worth the objection.

Upward revisions to previous forecasts

Looks like Mark Carney and his gang of policymakers have stepped back from their post-EU referendum gloom and doom! See, in their August meeting, the MPC members had their fingers on the rate cut trigger in case economic conditions turn out to be as pessimistic as their recent estimates. Fast forward three months and now the BOE thinks that the “near-term outlook for activity is stronger than expected three months ago.

In particular, the central bank is pointing to preliminary Q3 GDP coming in stronger-than-expected; business activity and sentiment picking up from their lows; household spending growing faster than they expected, and the housing market being more resilient than their earlier estimates. However, they also saw that investment intentions and the commercial property market remain subdued.

BOE’s Revised Projections (numbers in parenthesis reflect August’s estimates)
BOE’s Revised Projections (numbers in parenthesis reflect August’s estimates)

The BOE now expects economic growth to be stronger in the short-term but weaker in the long-term after taking into account lower income growth and uncertainty over the U.K. firms’ access to the EU’s single markets.

Inflation, currently boosted by sterling’s depreciation, is expected to return close to the 2.0% target after rising to as high as 2.75% in 2018, while unemployment is projected to rise to 5.50% by mid-2018 and will likely stay around the level throughout 2019.

From “rate cut” to “neutral” bias

So do higher inflation estimates mean that the BOE is back to thinking about raising its rates? Not necessarily. In this case, “not cutting rates” does NOT translate to “maybe raising rates.” Heck, Carney even explicitly said that “We have a neutral bias around policy going forward!”

See, the MPC believes that the inflation boost from the pound’s depreciation is temporary and that attempting to offset higher inflation with tighter policies would be “excessively costly” for output and employment growth.

However, the central bank also noted that “there are limits to the extent to which above-target inflation can be tolerated” even though they’re willing to “accommodate a period of above-target inflation” to make room for the projected increase in unemployment as well as the risks of a rate hike on inflation and economic activity.

GBP rally Part II

After shooting higher on the back of the U.K.’s High Court’s decision to let the Parliament in on the Brexit process, the pound found more momentum after the BOE’s “shift to neutral” decision was released.

The second leg higher didn’t have much momentum behind it though, and traders soon took profits and erased most of the post-BOE gains.

GBP 15-Minute Forex Charts
GBP 15-Minute Forex Charts

GBP/USD shot up to 1.2496 before capping the day at 1.2459, GBP/JPY hit a high of 128.90 before settling back down to 128.24. Ditto for EUR/GBP, which fell to .8860 before climbing back up to .8914.

While the BOE has shed its dovish feathers, it also hasn’t gone back to the hawk camp. Specifically, members are saying that “Monetary policy can respond, in either direction, to changes in the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.

The waiting game isn’t over, folks! Keep an eye on the Brexit saga and its impact on economic activity, exchange rate, and inflation for clues on the BOE’s next moves.