A preview of the Bank of England meeting this week by Westpac
- We expect the BOE will keep the Bank Rate on hold at 0.5% at its May meeting
- And that they will maintain their gradual tightening bias
- Inflation remains above 2%, but has been easing back, and some further softening is expected over the coming months
- The pace of activity has been easing off, including a step down in GDP growth to a lower than expected 1.2% in March (vs. 1.4% in December)
- Although some of this is due to earlier inclement weather, lingering uncertainty around the economic outlook and headwinds in the household sector are also a drag
- Reinforcing expectations for an on hold decision in May are recent comments from BOE governor Carney
- While he did note that rates are likely to rise over the coming years, he highlighted the continued uncertainty associated with Brexit and mixed tone of recent economic activity
Also, take note that the BOE will be releasing its inflation report as well at the same time. The projections there should go some way in telling whether or not the BOE views August as a viable replacement to May in terms of raising rates.
Given how much market pricing for a May rate hike have fallen, it's almost certain the BOE will not move on Thursday. The thing the market will be looking for is clues of a possible rate hike in August or this year.
