"Overall, our United Kingdom team noted that given the lower urgency for a rate hike due to the need for "limited tightening" over the forecast horizon, they see an increase in rates contingent on growth bouncing back and negotiations on the Brexit front staying positive, while their call for an August rate hike stands".
In terms of the interest rate outlook, the dovish tone was underlined by the change in the wording of the statement removing the word "expected" from the policy guidance saying it is likely to raise the Bank rate at a gradual pace and to a limited extent.
The quarterly inflation report (IR) noted that CPI had "fallen back more quickly than expected" at the time of the last quarterly report in February. However, at the same meeting during which the Bank's MPC voted to hold interest rates steady, they also downgraded their forecast for the year's economic growth from 1.8% to 1.4%. Financial markets price in a roughly 65 percent chance of a rate rise by then, according to interest rate futures.
The BoE said the economy would grow by 1.4 percent this year, down from the 1.8 percent it predicted in February, with slowing consumer lending and a sluggish housing market creating greater-than-usual uncertainty about consumer demand.
In line with what has become a new standard within the Monetary Policy Committee (MPC), there are seven doves voting in favor of the decision and two arch-hawks, Ian McCafferty and Michael Saunders voting in favor of 25 basis points rate hike in May. The MPC did underline that there were exceptional circumstances presented by Brexit, which is set to occur next March within the forecast horizon that the MPC considers.More news: Boston Dynamics' Atlas humanoid jog like humans
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In its May Inflation Report, the BoE revised its projected GDP growth expectations for the second quarter of 2018 down from the February estimate of 1.8% to 1.4%, while predicting inflation will fall to 2.4%, rather than 2.7% as previously forecast. Q1 growth came in at a desultory 0.1%.
Quilter's Gillham concluded: "By holding off from a rate rise today, the Bank gives itself breathing room to raise rates later in the year if the picture improves".
Recent data "had been consistent with a temporary soft patch", most of the BoE's rate-setters said.
Moreover, subsequent surveys of business and consumer activity showed little rebound in April - adding support to the view of Britain's statistics agency that the slowdown in first-quarter growth to 0.1 percent was largely unrelated to the weather.
The governor said United Kingdom exporters had remained in a "sweet spot" since the decline in sterling in the wake of the Brexit vote.