BoE Preview: Major Banks are forecasting an unanimous on-hold vote on rates

Tomorrow, we have an all-important Bank of England (BOE) interest rate decision due at 1200 GMT. As we head closer to the decision timings, here are the expectations as forecasted by the economists and researchers of major banks for the upcoming policy setting meeting.

With Brexit entering an intense period, most of the banks don’t expect the BoE to alter its monetary policy in February. The central bank may revise down its near-term inflation forecasts, while not offering any major signals.

Nordea Markets

“We expects the BoE will keep its policy rates at 0.75% on Thursday and markets will therefore focus on the inflation report.”

“We see downside risks on both growth and inflation compared to the November report. At the moment, it is all about Brexit, which means the real economy only plays a minor part and will continue to do so in the coming months.”

“Carney has stressed that a no deal could lead to a rate hike, although neither we nor markets are convinced.”

Nomura

“We do not expect any changes to monetary policy.”

“Risks to its economic growth forecasts look to be to the downside.”

“Near-term inflation is set to be revised down on account of lower energy prices, but what's more important from a policy perspective is where the MPC sees inflation at the two- and three-year horizons.”

“The Bank can realistically continue to base its forecasts on a "smooth adjustment to the average of a range of possible outcomes for the UK's eventual trading relationship with the European Union", though this may be the last time it can do this - depending on how the negotiations (with both the EU and the House of Commons) proceed in the coming weeks.” 

ING

"When the Bank of England announces it's latest interest rate decision on Thursday, there will be just 50 days left until the UK is scheduled to leave the EU," note ING analysts and add: "With no clarity on whether a deal will be in place by then, or indeed if the 29 March deadline will be pushed back, there is little doubt policymakers will keep policy unchanged this week while likely striking a tone of greater caution."

“Economic data is deteriorating, and it is likely growth will continue to stall (or potentially stagnate completely) through the first quarter as business and consumer caution grows. This means a rate hike in the first half of 2019 looks very unlikely, but further tightening later in the year shouldn't be completely ruled out. With wage growth continuing to perform strongly, we sense that policymakers would like to raise rates again if they can.”

“Of course, whether they can or not depends almost solely on Brexit - a fact that is increasingly reflected in markets by their lower sensitivity to surprises in UK data.”

“If the government does gradually inch towards a cross-party solution on Brexit (for instance committing to a permanent customs union) that ultimately commands a majority for a deal, this would take 'no deal' off the table and allow the transition period to begin. This scenario would likely see the Bank of England follow with further policy tightening, although admittedly such a solution still seems quite some way off.”

Rabobank

Analysts at Rabobank are not expecting the Bank of England to alter its policy settings at the February meeting this week.

“The tight labour market indicates that a rate hike would have been on the cards for today’s meeting, but this is being more than overshadowed by Brexit uncertainties.”

“The meeting in May offers the best hope of a hike to 1.00%. This, however, assumes that the UK will be leaving the EU with a deal in place.”

“If there is no sign of any material progress on Brexit in the next few weeks, leaving the MPC without the clarity it so much needs, we may want to re-visit our forecast.”

TD Securities

Analysts at TD Securities are expecting a unanimous on-hold vote for the upcoming BoE meet tomorrow.

“The MPC remains in the background as Brexit enters an intense period, and forecast changes are unlikely to be material.”

“Uncertainty remains elevated and activity is likely to remain choppy at best through 19Q1.”