BoE to refrain from acting on rates today – UOB

Researchers at UOB Group give their view on the upcoming BoE interest rate decision.

Key Quotes

“It seemed a certainty, just a couple of months ago, that the Bank of England (BoE) would raise interest rates when its monetary policy committee (MPC) holds its May meeting”.

“However, financial markets now point to a less than 20% chance of a rate hike for the May meeting, compared with over 90% a month ago. The dramatic turnaround was triggered by dovish comments from BoE Governor Mark Carney (whom in an interview with the BBC on 20 April, attempted to quell market expectations of a May hike arguing there was still a lot of data to consider),together with a slew of downbeat data”.

“We now expect the BoE to keep rates unchanged in a split vote at the May MPC meeting, having previously expected a hike to 0.75%. However, this is likely to be a delay, rather than abandonment, of the central bank’s plans to gradually normalize monetary policy. Furthermore, this week’ Super Thursday decision has also not lost its importance. The Inflation Report and BoE Governor Mark Carney’s press conference will be crucial in setting up market expectations for an August rate hike, which has the potential to impact GBP”.