Bank of England Preview Central Bank Biding Its Time
When will the BoE decide on interest rates?
BoE interest rate decision takes place on Thursday 5e August at 12:00 BST.
What to expect from the Bank of England?
The BoE is generally expected to keep its monetary policy unchanged with interest rates held at a record low of 0.1% and its bond buying program stable at £ 875bn at the end. of the year.
Data to date
Data from the past 6 weeks has shown that the economic recovery continues to progress. However, more recent figures point to stagnation in growth. Retail sales and consumer inflation were weaker than expected in June and PMI data shows a deceleration in activity growth most likely due to the increase in covid cases. Mixed data suggests it’s too early for the BoE to talk about declining support.
That said, policy maker Michael Sanders has already sent a strong signal that he is inclined to vote for an early end to QE. Deputy Governor Sir Dave Ramsden has also recently adopted a more hawkish tone. But other committee members such as Jan Vlieghe and Jonathan Haskel believe it is still too early to cut QE instead of preferring to let the asset purchase program run until the end of the year. . The vote on this will be closely watched, more dissenters could raise the pound.
No indication of the rate hike
Given the increase in cases of Delta covid which has clouded the economy’s short-term outlook, the BoE is unlikely to offer any hints or clues on the date of the first interest rate hike. A hawkish turn at this meeting seems unlikely, but the bank could try to adopt a more optimistic tone when it releases its quarterly forecast.
The BoE could raise its inflation forecasts. Think tank NIESR forecasts inflation to rise to 3.9% early next year. The BoE could follow suit by revising its inflation forecast upwards from 2.5% in May to closer to 4%. Rising inflation could add some pressure to the BoE to explain how it will approach tapering.
Unemployment could be better than initially feared, a peak of 5.8% had already been expected. However, with the government’s fall leave program ending, the BoE will want to see how the labor market holds up.
Wait it’s time
There are two main reasons the BoE will want to stay stable and bide its time. First, to see how the latest wave of covid plays out, and second to see how the end of the leave regime is affecting the labor market.
Learn more about the BoE
How could the BoE move the GBP / USD – What’s next for the GBP / USD?
GBP / USD recently broke above its two-month descending channel. However, the pair failed to regain resistance at 1.40. It is currently trading above the upper channel band but below the DMA 50. The RSI favors the upside.
A hawkish tilt by the BoE could see GBP / USD recover 1.40 in order to push up to the June 16 high of 1.4130 and the round number of 1.42.
On the other hand, a loose sounding BoE could see GBP / USD move back below 1.3875 and into the descending channel, taking the 200 MA to 1.3750 info focus.
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