Bank of England interest rate decision preview: what to expect
The Bank of England meets this week amid mixed economic signals. Here's what could influence their decision and how markets might react.
Market expectations for the 7 November meeting
The Bank of England's (BoE) Monetary Policy Committee (MPC) gathers this week on Thursday, with 90% of market participants expecting rates to be cut by 25 basis points (bp) from 5% to 4.75%.
This follows the central bank's first interest rate cut of 2024, which occurred on its meeting ending on 31 July 2024. At this meeting, the MPC voted by a majority of 5–4 to reduce bank rate by 0.25 percentage points, to 5%. Four members preferred to maintain bank rate at 5.25%.
The trading platform will likely see increased activity around the announcement, as traders position themselves for potential market moves.
Investors using spread betting and CFD trading accounts should prepare for heightened volatility during the announcement.
Key economic indicators influencing the decision
Recent data presents a complex picture for the BoE's decision-makers. The current inflation reading of 1.7% is below the bank's 2% target, thus no longer of immediate concern to the BoE.
According to the Office for National Statistics, the UK unemployment rate (for people aged 16 years and over) was estimated at 4.0% in June to August 2024 versus 4.1% previously.
From June to August 2024 annual growth in employees’ average regular earnings (excluding bonuses) was 4.9% and annual average regular earnings growth for the public sector 5.2%, down on the previous three-month period when it was 5.7%. As for the private sector this was 4.8%.
5-year UK employment change graph
The UK labour market data thus remains robust, with wage growth continuing to run above comfortable levels for the BoE. This suggests underlying inflationary pressures persist.
Those interested in understanding these market dynamics can open a demo account to practice trading around central bank announcements.
Global monetary policy context
The US Federal Reserve (Fed) meets this week on Thursday as well, with markets pricing in a 25 bp rate cut to 4.50% - 4.75% with a near 100% probability. This creates an interesting backdrop for the BoE's decision as global central banks are increasingly shifting their focus from fighting inflation to supporting economic growth.
Forex trading could see increased activity as diverging central bank policies create opportunities in currency markets.
Traders should consider how different policy paths might affect trading signals and market movements.
Potential market implications
The FTSE 100 and British pound sterling (GBP) typically show increased volatility around BoE meetings. Trading online requires careful risk management during these events.
The technical picture for the FTSE 100 seems to suggest that a medium-term low is now in place at the late October post-autumn budget 8069 low with the index expected to re-integrate its September to October sideways trading range and revisit the 8300 zone.
For a bullish reversal to occur, a rise and daily chart close above the 29 October high at 8326 would need to unfold. Only then could an extension towards the August-to-October highs at 8396 - 8418 ensue.
FTSE 100 daily candlestick chart
The GBP technical analysis is similar to that of the FTSE 100 in that its post-UK budget slide versus the US dollar to $1.2844 has been followed by a recovery rally. This is taking the cross towards the key $1.3000 - $1.3045 resistance zone which may well be breached during November. If so, the $1.3300 region would be back in sight, but only once a rise and daily chart close above the 15 October high at $1.3103 has been made.
GBP/USD daily candlestick chart
Versus the euro, the GBP may slide back down towards its major September to October support zone at £0.8318 - £0.8296, provided that the September-to-October highs at £0.8447 - £0.8463 cap.
Daily EUR/GBP candlestick chart
Bond markets will be particularly sensitive to any shifts in the BoE's forward guidance, now that UK 10- and 30-year yields have risen to one-year highs at 4.52% and 4.97% respectively. This could create opportunities across multiple asset classes.
A rise above the 4.52% late October high in the UK 10-year Gilt yield, increasing UK borrowing costs further, could lead to the October 2022 and July to October 2023 highs at 4.63% to 4.75% being revisited.
Weekly 10-year Gilt yield candlestick chart
Those new to central bank trading can explore our trading for beginners guides for detailed insights.
The trading alerts feature can help traders stay informed of market moves during the announcement.
How to trade the BoE decision
- Research the potential market impact of different BoE scenarios
- Choose whether you want to trade or invest
- Open an account with us
- Search for relevant markets in our platform or app
- Place your trade using appropriate risk management
Remember to monitor both the rate decision and the accompanying commentary, as both can significantly impact markets.
Consider using stop losses to manage risk during potentially volatile trading conditions.
Stay informed about economic data releases that might influence the BoE's decision.
Keep track of global central bank policies that could affect UK markets.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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