{"id":146871,"date":"2019-05-02T10:19:39","date_gmt":"2019-05-02T14:19:39","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=146871"},"modified":"2019-05-02T10:19:39","modified_gmt":"2019-05-02T14:19:39","slug":"boe-to-hold-rates-steady-but-forward-guidance-is-what-matters","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/05\/boe-to-hold-rates-steady-but-forward-guidance-is-what-matters\/","title":{"rendered":"BoE To Hold Rates Steady, But Forward Guidance Is What Matters"},"content":{"rendered":"
May 2, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

The Bank of England will be holding its monetary policy meeting later today.\u00a0Investors at large expect the central bank to keep rates steady at 0.75%.<\/strong>\u00a0The BoE\u2019s meeting is gaining prominence after months of Brexit uncertainty. The central bank had been pushed to the sidelines as investors were watching the Brexit saga unfold.<\/p>\n

With Brexit now postponed to October, focus will once again shift back to Threadneedle Street.\u00a0The UK economy had been overshadowed by the Brexit headlines, but that is now set to change<\/strong>.<\/p>\n

With more than six months left for UK lawmakers to agree on a Brexit deal, the question is how the Bank of England will guide the markets.<\/p>\n

Will the BoE issue hawkish forward guidance? Will rates rise one more time before the October Brexit deadline?\u00a0<\/strong>These are just some of the questions playing on investors\u2019 minds ahead of the meeting.<\/p>\n

\"Bank<\/a>
Bank of England Interest Rates<\/figcaption><\/figure>\n

The short term money markets do not see any rate hikes until 2021.<\/strong><\/p>

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The monetary policy committee is forecast to leave rates steady,\u00a0but there could be some dissenting votes<\/strong>. The MPC is also forecast to leave the central bank\u2019s asset purchases steady by a unanimous vote as well.<\/p>\n

The markets are somewhat mixed into the event.\u00a0The National Institute of Economic and Social Research (NIESR) suggests that the central bank will hold off from rate hikes at least until 2020.<\/strong>\u00a0The estimates come as the UK\u2019s inflation has seen the underlying pressures building up over the past few months.<\/p>\n

While inflation continues to hover near the BoE\u2019s 2% inflation target,\u00a0growth in the UK is sluggish<\/strong>.<\/p>\n

BoE to Keep Rates Steady into 2020?<\/strong><\/h2>\n

Due to the lack of any policy changes at today\u2019s meeting, focus will turn to forward guidance. And policymakers will also be releasing\u00a0the updated growth and inflation forecasts today.<\/strong><\/p>\n

The central bank is faced with a mixed set of economic data. Inflation is close to the BoE\u2019s 2% target rate and wage growth is accelerating to an 11-year high. But growth, as measured by\u00a0GDP, remains weak<\/a>. There are calls for the UK to end its austerity measures. Recent lending data revealed that the UK government was borrowing less. However, market watchers estimate that this could end sooner rather than later.<\/p>\n

The UK\u2019s borrowing costs could rise more quickly than anticipated, a report from NEISR\u00a0recently\u00a0showed.<\/p>\n

NIESR estimates that\u00a0the UK will grow at a pace of 1.5% while inflation is forecast to average around 1.8% \u2013 1.9%\u00a0<\/strong>until next year.<\/p>\n

Consumer prices in April were unchanged at 1.9% for the second consecutive month. Meanwhile, core inflation eased to 1.8% recently.<\/p>\n

Any forward guidance from the Bank of England will still depend on the outcome of the Brexit negotiations. NIESR\u2019s estimates, for example, are based upon a scenario of a smooth or a soft Brexit.<\/p>\n

Some estimate that the BoE could signal the markets for a rate hike in August<\/strong>. But this is left to be seen on how the Brexit talks progress. The pound sterling has been trading in a range due to lack of progress on Brexit.<\/p>\n

Therefore,\u00a0the impetus shifts to the BoE to provide some guidelines for the markets into the next quarter.<\/strong><\/p>\n

The Hunt for a New BoE Governor<\/strong><\/h2>\n

Besides the monetary policy aspects,\u00a0the UK is also now actively searching for a replacement for the incumbent, Mark Carney<\/strong>. Carney\u2019s term was originally slated to end in the summer of 2018.<\/p>\n

However,\u00a0due to the Brexit uncertainty<\/a>, Carney extended his term as the governor of the Bank of England.\u00a0With the extension set to end in January 2020,\u00a0<\/strong>the UK government formally announced its search for a replacement at the Bank of England. There are a number of front runners, both from the BoE\u2019s current MPC set up as well as external candidates.<\/p>\n

With a possible change of guard around the corner,\u00a0t<\/strong>he BoE\u2019s task remains important as it will need to steer the Brexit uncertainty and upcoming changes to the central bank\u2019s leadership.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex The Bank of England will be holding its monetary policy meeting later today.\u00a0Investors at large expect the central bank to keep rates steady at 0.75%.\u00a0The BoE\u2019s meeting is gaining prominence after months of Brexit uncertainty. The central bank had been pushed to the sidelines as investors were watching the Brexit saga unfold. With […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-146871","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146871","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=146871"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146871\/revisions"}],"predecessor-version":[{"id":146881,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146871\/revisions\/146881"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=146871"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=146871"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=146871"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}