A couple of preview snippets to follow up on earlier posts:
- Deutsche Bank expect +25bps rate hike from the Bank of England this week – ‘close call’
- Nomura expect a +25bps rate hike from Bank of England today, but +50 remains on the table
This meeting is a tricky one: incoming data and projections are likely to support a 25 bps hike, but the MPC may be tempted to repeat a 50 bps hike alongside a dovish lean to speed up their journey to terminal.
They’ve signalled nothing about their intentions in recent weeks, either.
Ultimately we think 25 bps will prevail, but it’s a very close call.
Thursday’s decision is expected to bring out a 25bps hike with 50bps risk. Three quarters of forecasters expect a 25bps hike while the remainder expects 50. Markets are fully priced for 25bps and a little more.
There may be only minority appetite for following up June’s 50bps hike with another one of the same size. For one thing, though lagging, May’s total employment figures posted a 36K m/m drop and fresher payroll figures showed a modest 9K drop in June. Wage growth has nevertheless held firm at 7.3% y/y and the trend gains in month-over-month wage hikes has remained elevated.
Also key is the MPC’s assessment of recent evidence on inflation. The pattern this year has been to register hotter than seasonally normal gains in core CPI inflation compared to like months in history. While that continued in the latest readings for June, the overshoot of seasonal norms was nowhere nearly as large as in several other months.
The Bank of England statement is due at 1100 GMT, which is 0700 US Eastern time:
This article was written by Eamonn Sheridan at www.forexlive.com. Source