BoE: A close call between 50bps and 75bps – Danske Bank

Matías Salord FXStreet

Next week, the Bank of England will have its monetary policy decision. Consensus points to a 50 bps rate hike but a 75 bps is not ruled out. Analysts at Danske Bank expect fewer hikes than priced in markets as they emphasise the rising recession risk in the UK.

Key Quotes:

“We expect the Bank of England (BoE) to hike the Bank Rate by another 50bp at its next meeting bringing it to 2.25%. Markets are currently pricing around 65-70bp. We expect 50bp as opposed to 75bp, as we are more negative on the growth outlook. Also BoE has had a tendency to surprise to the dovish side at recent meetings.”

“BoE was the first G10 central bank to forecast a recession by Q4 2022 at its last meeting, while using a far more dovish market pricing as policy input than what is currently priced. We see this as a contributing factor to our base case as the growth outlook looks considerably worse now than back then given current market pricing.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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