- The Monetary Policy Committee of the Bank of England is expected to opt for a wait-and-see mode while deciding on monetary policy and its outlook in February Inflation report.
- The policy stance is highly conditioned by the actual form of Brexit that the UK government will deliver, with the Bank of England likely to point to the risks of no-deal Brexit to the UK economy and its currency.
- The Bank of England is set to stick to its one rate-hike-a-year policy with May becoming the most probable option for a hike once the dark clouds of Brexit disappear.
The Monetary Policy Committee (MPC) of the Bank of England is expected to keep the monetary policy unchanged just as it did back in November and December last year with the Bank rate at 0.75% and the stock of the purchased assets at £435 billion.
There are no many options for the MPC at the moment of hight Brexit uncertainty as the House of Commons rejected the government's Brexit proposal and the UK Prime Minister did not yet secure any variations to the current proposals with the partners in the European Union.
While leaving the monetary policy unchanged, the Bank of England is likely to voice once again the risks of a no-deal Brexit and say that no-deal Brexit is not the most likely scenario.
Given the slide in oil prices and a tight UK labor market conditions, the Bank of England Governor Mark Carney is expected to revise the short-term inflation forecast downwards while sticking to “gradual and limited” language as far as regarding the outlook for the Bank rate.
The Bank of England faces two contradicting trends related to its main policy target, the inflation. The oil price slump in the final quarter of 2018 is pressing on headline inflation to decelerate in the short-term while the UK labor market is tight with the unemployment rate at a 4-decade low and the UK wages are rising at the fastest growth rate in a decade.
While the Bank of England may downplay the short-term inflation outlook and say it is temporary, the long-term outlook for inflation is more and more likely to be driven by the rising wages and that is fundamentally much more important factor.
With Brexit uncertainty weighing on the economic activity and the forward-looking indicators like PMIs pointing to a sharp deceleration in the UK economic activity with new orders and exports down, the Bank of England is most likely to stick to its one rate-hike-a-year policy that makes May Inflation report the hottest candidate for the rate hike in 2019.
The twist to the outlook for the Bank rate that would change the expectations top no rate hike this year would have a detrimental effect on Sterling, especially should the outlook change because of the negative Brexit deal implications.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
![EUR/USD stays below 1.1100, looks to post weekly losses](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/european-euro-coin-on-top-of-american-dollar-bill-11292130_XtraSmall.jpg)
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
![GBP/USD struggles to find a foothold, trades near 1.3150](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/iStock-157771037_XtraSmall.jpg)
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
![Gold retreats toward $2,500 ahead of the weekend](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/gold-bars-50657756_XtraSmall.jpg)
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
![Week ahead – Investors brace for NFP amid Fed rate cut speculation](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/america-back-to-work-gm178972493-25143312_XtraSmall.jpg)
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
![Easing Eurozone inflation to back an ECB rate cut in September](https://editorial.fxstreet.com/images/Macroeconomics/Countries/Europe/Eurozone_countries/Eurozone/eu-flags-flying-at-the-european-commission-building-brussels-belgium-24759579_XtraSmall.jpg)
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.