A preview of the Bank of England meeting this week by Westpac

  • We expect the BOE will keep the Bank Rate on hold at 0.5% at its
    May meeting
  • And  that they will maintain their gradual tightening
  • Inflation
    remains above 2%, but has been easing back, and some further
    softening is expected over the coming months
  • The pace of activity has been easing off, including a step down
    in GDP growth to a lower than expected 1.2% in March (vs. 1.4%
    in December)
  • Although some of this is due to earlier inclement
    weather, lingering uncertainty around the economic outlook
    and headwinds in the household sector are also a drag
  • Reinforcing expectations for an on hold decision in May are recent
    comments from BOE governor Carney
  • While he did note that
    rates are likely to rise over the coming years, he highlighted the
    continued uncertainty associated with Brexit and mixed tone of
    recent economic activity

Also, take note that the BOE will be releasing its inflation report as well at the same time. The projections there should go some way in telling whether or not the BOE views August as a viable replacement to May in terms of raising rates.

Given how much market pricing for a May rate hike have fallen, it’s almost certain the BOE will not move on Thursday. The thing the market will be looking for is clues of a possible rate hike in August or this year.

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