Economists at TD Securities discuss the Bank of England interest rate decision and its implications for the GBP/USD pair.
“With the EPG coming to an end in April, the MPC worries about the likely more persistent inflation profile, opting to shift to a restrictive policy stance as quickly as possible. Messaging is one of accelerating the pace, rather than adding further to terminal, but there remains little guidance beyond this meeting. GBP/USD at 1.1581.”
“The MPC decides 8-1 to hike Bank Rate by 75 bps, but the tone remains a somewhat cautious one, with emphasis on uncertainty. Projections will be perplexing, with market pricing for the yield curve already out of date. The MPC will likely avoid giving any hints on neutral or terminal policy rates, but that could come in December or beyond. GBP/USD at 1.1466.”
“With the growth picture still soft and fiscal policy likely to add further to the downside, the MPC errs on the side of caution (not unlike their recent strategy), opting for a smaller rate hike. The Year 3 inflation forecast is played up, which could even show negative inflation at that point. GBP/USD at 1.1380.”
See – BoE Preview: Forecasts from 10 major banks, big rate hike in doubt
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