BoE seen raising rates by 25 bp, GBP looks to voting results – UOB

Researches at UOB Group expect the BoE to hike the refi rate by 25 bp at today’s meeting, while price action in Cable should largely hinge on MPC’s vote.

Key Quotes

“We expect the BoE Monetary Policy Committee (MPC) to raise the Bank Rate by 25bps from 0.25% to 0.50%. If it materializes, this would be the first rate rise in 124 months, and doing so would bring to an end the longest period without a British rate increase for 66 years”.

“Whilst the vote could therefore be anything from 5-4 to 7-2; price action in the GBP will crucially depend on this vote outcome. The smaller the majority, the higher are expectations likely to be that this is a “once and done” rate rise. On the other hand, a higher majority is likely to increase expectations of another rate rise next year”.

“We are looking for a 6-3 vote in favour for a hike, with Jon Cunliffe, Dave Ramsden and Silvana Tenreyo as the dissenters. Consensus forecasts are also for a 6-3 vote in favour for a hike. Hence, a 5-4 vote would be deemed as more dovish and could send the GBP lower to retest the 1.30-level, whilst a 7-2 vote could trigger a fresh rally, driving GBP back above 1.34”.