​​Bank of England Interest Rate Decision Preview: What to Expect​

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 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%; 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 basis point rate cut to 4.50%-to-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 sterling 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 8,069 low with the index expected to re-integrate its September-to-October sideways trading range and revisit the 8,300 zone.

​For a bullish reversal to occur, a rise and daily chart close above the 29 October high at 8,326 would need to unfold. Only then could an extension towards the August-to-October highs at 8,396-to-8,418 ensue.

​Daily FTSE 100 candlestick chart

​For the British pound sterling the technical view 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-to-$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.

​Daily GBP/USD candlestick chart

​Versus the euro, the pound sterling may slide back down towards its major September-to-October support zone at £0.8318-to-£0.8296, provided that the September-to-October highs at £0.8447-to-£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

1. ​Research the potential market impact of different BoE scenarios
2. ​Choose whether you want to trade or invest
3. ​Open an account with us
4. ​Search for relevant markets in our platform or app
5. ​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.