BoE Preview: Forecasts from eight major banks, final 25 bps hike

The Bank of England (BoE) will announce its interest rate decision on Thursday, March 23 at 12:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of eight major banks.

The BoE will likely deliver a 25 basis points (bps) rate hike, raising the key policy rate from 4.0% to 4.25%. It will be the eleventh straight hike and probably the final one before the central bank adopts a wait-and-see approach.

TDS

“The BoE was one of the first G10 central banks to start this hiking cycle, and we expect it to be one of the first to end the cycle, with a 25 bps hike to 4.25%. The decision, however, is finely balanced. We do not expect the MPC to formally announce that it has reached terminal, leaving the door open to further hikes. The BoE will be overshadowed by the Fed, which will be far more consequential. That said, the last 25 bps hike of this cycle may have more significance for EUR/GBP. Barring another major shock, 0.8700/50 should be solid support and a case to leg into topside. We also see downside risks to Cable given GBP's tactically rich valuation.”

Danske Bank

“We expect the BoE to hike the Bank Rate by 25 bps.  We expect this to mark the peak in the Bank Rate of 4.25% as the BoE is set to signal a pause in the hiking cycle. We expect EUR/GBP to move slightly lower upon announcement. Overall, we regard the relative central bank outlook to be a positive for EUR/GBP but with other factors acting as a headwind, we increasingly see a case for continued range trading in the cross.”

ING

“We lean towards a 25 bps increase as the impact of past hikes has yet to feed through.”

Rabobank

“We expect the BoE to slow down its tightening cycle and stick to our call of a 25 bps increase to 4.25%. Although global financial instability risks have widened the range of potential outcomes, we do not believe the MPC’s decision-making has changed in response. Our view remains that the balance is tilted towards inflation risk, while non-interest rate tools could be used to mitigate the impact of financial contagion.”

Nomura

“We stick with our long(ish)-held view that the BoE will raise rates by a final 25 bps. After peaking at 4.25% we see the Bank keeping rates on hold for around a year before cutting by 75 bps around the middle of 2024 (leading rates back to 3.50%).”

SocGen

“We conclude that the MPC has further to tighten but in smaller steps of 25 bps. In the absence of a further flare-up of liquidity concerns, we expect this next move of 25 bps to be at the 23 March meeting, probably followed by a final 25 bps in May. The vote is likely to be 7-2.”

Wells Fargo

“We expect the BoE to hike rates 25 bps to 4.25%, smaller than the 50 bps hike delivered in January. With inflation also now more clearly on a slowing trend, we believe that this week could also prove to be the final rate hike of the current cycle.”

Credit Suisse

“We expect the BoE to vote 1-6-2 for a 25 bps hike but it is a very close call. We expect one member to vote for a 50 bps hike, six for a 25 bps hike, and two for unchanged rates.”