BoE to hike 25bps, will there be hint on pause?

Today marks BoE’s much-anticipated “Super Thursday,” with markets bracing for a 25 bps increase that brings interest rate to 4.50%. While some speculate that BoE may hit the pause button post today’s rate hike, opinions are far from unanimous. Notably, Goldman Sachs anticipates interest rate to reach a terminal rate of 5.00% by August, implying two more rate hikes in the pipeline.

Attention will be focused on voting too. Known doves Silvana Tenreyro and Swati Dhingra are anticipated to vote against any change. However, given that inflation remained in double digits at 10.1% in March, any dissent from the remaining seven MPC members could be viewed as a dovish surprise. Conversely, hawkish surprises could arise if any members vote for a more aggressive 50bps hike today.

Further intrigue lies in the new economic projections, which will be closely examined for hints of the future rate path. Outlook for inflation remains shrouded in uncertainty. A report released today by NIESR suggests that inflation will remain “persistently elevated,” decreasing only to 5.4% by the end of 2023. This forecast markedly exceeds prediction by the Office for Budget Responsibility, which anticipated inflation to drop to 2.9%.

Here are some previews on BoE:

• BoE Expected to Hike, Then What?
• Will Bank of England Once Again Fail to Address the Inflation Problem?
• Bank of England Preview – 25 and Priming the Markets for a Pause