BOE monetary policy decision - Overview
It’s a ‘Super Thursday’ again and time for the Bank of England’s (BOE) second rate hike announcement since the global financial crisis (GFC), which will be announced at 1100GMT, accompanied by the release of Quarterly Inflation Report (QIR) and the minutes of the policy meeting.
The BOE is widely expected to raise the benchmark bank rate by 25 bps to 0.75% from 0.50% previous, with a 7-2 voting composition in favor of a rate hike. Recall that at the June BOE MPC meeting, the central bank’s Chief Economist Andy Haldane joined the arch hawks Ian McCafferty and Michael Saunders. Hence, today, we could see a shift to the hawkish camp either by Governor Carney or Deputy Governor Broadbent for the 7-2 vote pattern.
However, the rate hike is likely to turn out to be a ‘dovish rate hike’, as this could be the final rate hike for this year, with the central bank seen downplaying the talks of rate hikes in the coming months. A lack of progress on the Brexit talks and the rising odds of a ‘Hard Brexit’ is expected to be the main reasons for the BOE to pour cold water on the rate hike outlook.
Also, not to forget the recent series of downbeat UK economic releases and escalating US-China trade tensions could keep the BOE on hold in the near future. Focus also remains on the QIR and Carney’s post-policy press conference.
“The Inflation Report is unlikely to show any noticeable changes in GDP and CPI forecasts from the previous updates. Therefore any significant changes could move the pound in the direction of the surprise, everything else being equal,” according to Fawad Razaqzada, Technical Analyst at Forex.com.
How could it affect GBP/USD?
In the wake of a ‘dovish rate hike’, the pound is expected to extend its bearish momentum versus its American counterpart and could breach the 1.3000 psychological support.
“At the downside, sustained break below 1.3085 base would open way towards psychological 1.30 level and key support at 1.2957 (19 July low). Initial (upside) barrier lays at 1.3122 (10SMA), followed by falling 20/30SMA’s (1.3155/68) and bear-channel upper boundary (1.3207), Slobodan Drvenica at Windsor Brokers Ltd notes.
Key Notes:
GBP/USD Forecast: Setting up for a fresh bearish breakdown ahead of BoE
GBP/USD looks vulnerable on BOE day — Confluence Detector
The Bank of England Preview: Dovish rate hike set to undermine Sterling's ground
About the BOE interest rate decision
BOE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.
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