BoE Preview: Forecasts From Foure Major Banks

The Bank of England (BoE) will announce its decision on Thursday, February 3 at 12:00 GMT, and as we get closer to the release time, here are the expectations forecast by the economists and researchers of 4 major banks.

Deutsche Bank

“We expect the BoE to follow up their December rate hike with another 25bps increase, taking the Bank Rate to 0.5%. Furthermore, we expect that the MPC should confirm that any APF reinvestments will cease from here on out, resulting in around GBP38 B falling out of the Bank’s balance sheet this year.”

Danske Bank

“We expect the BoE to hike the Bank Rate to 0.50%. We expect two additional hikes this year (May and November) but risks are skewed towards more rate hikes. Markets are pricing in nearly five rate hikes this year. We expect the BoE to announce ‘passive QT’ (ceasing reinvestments of maturing bonds) in connection with the upcoming meeting. We expect ‘active QT’ (selling bonds to markets) when the Bank Rate reaches 1%. Our base case right now is that happens in November, but since we believe risks are skewed towards more rate hikes, risk is also skewed towards an earlier start for ‘active QT.’ We still think 0.83 is the bottom for EUR/GBP and seeing a case for a slight move higher to 0.84 in 12M in case the BoE is not as hawkish as currently priced.”

Citibank

“We now expect a unanimous 25bps hike this week, the beginning of passive QT and potentially more hawkish near-term guidance. The team’s bias remains towards a rapid but ultimately limited monetary tightening in H1-2022, which likely means a refocusing on a subdued medium-term outlook.”

TDS

“We expect the MPC to hike Bank Rate to 0.50% and confirm that Gilts will start maturing off its balance sheet from March. The BoE needs to overdeliver to reverse some of GBP’s recent misfortunes. That’s unlikely, suggesting a near-term push towards 1.32, reflecting lingering GBP headwinds and further positioning adjustments in the short-term.”