Bank of England preview – Caution prevails as rates expected to stay unchanged
This week’s Bank of England decision is likely to see ‘no change’ triumph once more, as policymakers err on the side of caution.
No change as MPC awaits clearer inflation data
The Bank of England's (BoE) Monetary Policy Committee (MPC) is widely anticipated to keep the nation's main interest rate unchanged when it announces its latest policy decision on Thursday. Market experts suggest the nine-member panel will opt to hold the Bank Rate steady at 4.25% as it monitors evolving inflation dynamics in the UK economy.
MPC still split on next move
At the previous MPC gathering in February, the voting pattern revealed a split among policymakers. While seven members voted to maintain rates, two favoured a quarter-point rate hike to intensify inflation-fighting efforts. Notably, one MPC member advocated for a rate cut, underscoring the complexities surrounding the appropriate monetary policy stance.
Q3 rate cut still expected
Despite the current holding pattern, financial markets and most analysts anticipate the BoE will eventually pivot toward easing monetary conditions. Futures pricing indicates growing expectations for a rate cut as early as the third quarter (Q3) of this year, reflecting hopes that stubbornly high inflation will begin to moderate.
Unlike some previous MPC meetings, the rate decision on Thursday will not be accompanied by a press conference from Governor Andrew Bailey. This occurs every other month, leaving market participants to scrutinise the published policy summary and voting details for potential clues about the BoE's future policy leanings.
BoE strikes a balance between worrying about inflation and growth
The MPC's deliberations continue to grapple with the challenge of reining in elevated inflation while avoiding an overly restrictive stance that could exacerbate risks of an economic downturn. Recent data releases, including consumer price inflation figures and labour market dynamics, will factor into the committee's assessment of the appropriate policy path.
As the UK economy navigates uncertain terrain, the BoE's cautious approach underscores the complexities of calibrating monetary policy in an environment marked by persistent inflationary pressures and potential growth headwinds.
The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.
Be ready to act on Bank of England announcements
Take a closer look at the potential effects of the BoE’s interest rate announcement, ahead of the next Monetary Policy Committee (MPC) meeting on 17 September 2020.
- What was decided at the last BoE meeting?
- How does the MPC influence inflation?
- How might the pound be affected by the next meeting?
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
