BoE Monetary Policy Decision – Overview

The Bank of England (BoE) is scheduled to announce its monetary policy decision this Thursday at 11:00 GMT. The UK central bank is expected to hike interest rates by another 25 bps, marking the 12th consecutive lift-off amid the persistent rise in UK consumer inflation. Apart from this, investors will focus on the accompanying monetary policy statement, which provides the Monetary Policy Committee's (MPC) economic and inflation projections. This will be followed by the post-meeting press conference at 11:30 GMT, where Governor Andrew Bailey's comments will be closely scrutinized for clues about the policy outlook.

According to Matías Salord, Senior Analyst at FXStreet, high expectations from the market might mean that a surprise on the dovish side could be on the cards: “The expected hawkish tone should strengthen the currency. However, some of this is already factored into the market, so if the Bank of England (BoE) adopts a more dovish stance, the Pound could face downward pressure.”

Analysts at Nomura offer a brief preview and write: “We expect the BoE to raise rates by 25 bps. While we see the risks to our central view as tilted towards zero rather than 50 bps (especially with renewed banking concerns), we think the chances of something other than a 25 bps hike are low. This is a MPR meeting, and we expect the Bank to remove much if not all, of the recession that it had been expecting previously. The Bank’s end-horizon inflation forecasts still look very low, and we would not be surprised – especially with core inflation looking sticky and with stronger GDP forecasts – if the Bank was to raise its expectations. We see the Bank raising rates again by 25 bps in June for a peak of 4.75%. Thereafter, we see rate cuts from the second half of 2024 to take rates back down to 3.50% by early 2025.”