When is the Bank of England interest rate decision and how could it affect GBP/USD?

BoE Monetary Policy Decision – Overview

The Bank of England (BoE) is scheduled to announce its monetary policy decision this Thursday at 12:00 GMT. The UK central bank is widely expected to raise the interst rate for the ninth consecutive meeting, though the Monetary Policy Committee (MPC) is likely to remain divided over the magnitude of the rate increase. It is worth recalling that two of the nine MPC members were in favour of a smaller increment in November. Hence, the focus will remain on the accompanying monetary policy statement and the MPC vote distribution in the absence of the post-meeting press conference.

Analysts at Deutsche Bank offer a brief preview of the key central bank event and write: “We expect the BoE to hike by 50 bps after last month's 75 bps increase, the only one in the current hiking cycle so far, taking the Bank Rate to 3.5%. We also expect the decision to be accompanied by dovish messaging amidst concerns over potential over-tightening. The risks of sticky inflation and wage pressures, among other factors, are expected to lead to a 4.5% terminal rate by May of next year (50 bps in February and 25 bps in March and May). But growth concerns pose downside risks to the expectations.”

How could it affect GBP/USD?

Against the backdrop of signs of easing inflation pressures, the looming recession risk might force the BoE to adopt a gradual approach towards raising interest rates. This, in turn, suggests that the markets are unlikely to react much to the expected 50 bps rate hike. Conversely, a dovish tilt, or a three-way vote split, could weigh heavily on the British Pound. Apart from this, the ongoing US Dollar recovery from a multi-month low should pave the way for some meaningful corrective pullback for the GBP/USD pair.

Key Notes

  •  BoE Interest Rate Decision Preview: Focus on vote split amid high inflation and economic gloom

  •  BoE Preview: Forecasts from 13 major banks, a fairly straightforward 50 bps hike

  •  BoE: Three scenarios and the implications for GBP/USD – TDS

About the BoE interest rate decision

The 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 will be 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 will be seen as negative, or bearish.