Economists at Commerzbank analyze GBP outlook ahead of the Interest Rate Decision. Market likely to remain sceptical about whether the BoE is taking things seriously enough In September the BoE used the surprise to the downside on inflation as a welcome opportunity to take a break in its rate cycle. And at present there is little to suggest that it will raise rates again today.
If the BoE is able to convince the market today that it is determined in its fight against inflation even without further rate hikes, for example with a clear ‘high for longer’ Sterling is likely to benefit in view of the just under three rate cuts priced in until the end of next year. However, after the surprising cancellation of the last rate hike, the market is likely to remain sceptical about whether the BoE is taking things seriously enough.