Analysts: Inflation in focus as BoE delivers monetary policy verdict
The Bank of England is expected to focus on inflation when it publishes its latest monetary policy decisions at noon, according to analysts.
Barret Kupelian, senior economist at PwC, said that vaccine rollouts, GDP data and positive Budget measures will “tilt the balance of risks to the UK economy towards the upside”.
“As a result, the MPC is likely to spend less time pondering on the mechanics of negative interest rates and more on the potential scenarios on UK inflation.”
Economy set to ‘expand vigorously’
Invesco fund manager Michael Matthews echoed this outlook, stating that the UK economy is likely to expand vigorously as Covid restrictions are lifted.
“This recovery has been further supported by the chancellor’s recent budget which extended the furlough scheme and delayed the onset of fiscal consolidation to 2023.”
Thursday delivers the latest monetary deliberations from the BoE, where the committee “appears at a crossroads” in dealing with opposing objectives, according to Stuart Cole, chief macro strategist at Equiti Capital.
Cole said the committee must keep a lid on rising inflationary pressures while simultaneously supporting the economy and the jobs market.
“Expect this Thursday’s meeting to be a template for the foreseeable future, i.e., policy metrics on hold, inflationary pressures contained and ongoing downside risks seen to growth – and with the MPC’s fingers tightly crossed that this is enough to keep borrowing costs low.”
No fireworks expected
Matthew Ryan, senior market analyst at Ebury, does not expect “too many fireworks” from today’s meeting.
Ryan believes rates will be held steady but expects a heavy focus on whether the bank signals its intention to keep rates at rock-bottom levels for the foreseeable future.
“With the UK’s vaccination programme going well, investors are now betting on a rapid economic recovery and a sharp increase in inflation and are currently pricing in a 15 basis point rate increase in late-2022.”