BoE: The upcoming decision to be a decisive pause – TDS
18.09.2024, 11:55

BoE: The upcoming decision to be a decisive pause – TDS

For BoE Bank Rate, the upcoming decision will be a decisive pause, with a 7-2 vote expected and with the key uncertainty surrounding the size of balance sheet reduction over the next year. The BoE is widely expected to stay on hold, so the Pound Sterling (GBP) will remain driven by market sentiment post-Fed. TDS FX analysts give note scenarios of how the BoE can proceed.

BoE is likely to stay on hold

“Hawkish (20%, Hold, Faster QT): As in the base case, the MPC votes decisively to hold rates, without ruling out further cuts. QT is more aggressive, maintaining another £50bn of active gilt sales over the next year, on top of the £87bn in maturing debt, making for a total of around £137bn in balance sheet reduction.”

“Base Case (70%, Hold, £100bn QT): The MPC votes 7-2 (+/- 1) to keep rates on hold at this meeting. Nothing changes materially enough in the Summary/Minutes to suggest a rate cut in November is off the table, but the MPC does continue to sound quite cautious around easing given strong wage growth and services inflation. QT is announced at another £100bn for the next year, unchanged from last year, but consisting of a much higher share of maturing debt, and lower active Gilt sales.”

“Dovish (10%, Hold, No Active Gilt Sales): The MPC leaves rates on hold in a close 5-4 vote, and ends active gilt sales, leaving QT at £87bn for the next 12 months. Importantly, the MPC notes that while it has left policy on hold, it explicitly says that it expects further reductions to Bank Rate in the future, leaving November firmly on the table, and implying that sequential cuts are possible from there.”

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