The Bank of England in the Spotlight
Investors keenly await today's monetary policy decision from the US Federal Reserve, but on Thursday, focus will shift to its UK peer, the Bank of England (BoE), for a potentially consequential meeting.
Expectations around the Fed point to a tapering of asset purchases and no rise in interest rates, but for the BoE, the situation appears reverse.
In the last policy meeting, two out of nine BoE policy makers voted to unwind the £895 billion Quantitative Easing program (QE), but this does not seem to be the main focal point this time around – although action cannot be ruled out and the vote count could still be important.
Back in August, the bank's Monetary Policy Committee (MPC) had stated that it intends to begin reducing the stock of purchased assets "when Bank Rate has risen to 0.5% and if appropriate given the economic circumstances".[1]
The interest rate currently stands at 0.1%, to which it was reduced more than a year ago, in the wake of the pandemic and the economic shock it caused. Elevated prices however, have led to calls for an increase, as they are well above the bank's 2% target - despite UK CPI Inflation easing to 3.1% y/y in September.
UK bond yields have risen over the last few months and markets seem to be aggressively expecting a hike, even as early as tomorrow, while there has also been some hawkish commentary from some BoE officials recently. On the other hand, the bank unanimously stood pat on rates in the last meeting and a move now, may constitute a dramatic shift.
The Bank of England hands down its policy decision on Thursday November 4 at 12:00 GMT and remains to be seen whether it is ready to act or will retain rates at 0.1% as currently forecasted in the Economic Calendar.
In any case, the outcome has the potential to spur volatility and two way moves as markets will be digesting the decision and its various components.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 03 Nov 2021 https://www.bankofengland.co.uk/-/media/boe/files/monetary-policy-report/2021/august/monetary-policy-report-august-2021.pdf |
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