BoE Preview: Forecasts From Three Major Banks

The Bank of England (BoE) will announce its decision on Thursday, March 17 at 12:00 GMT, and as we get closer to the release time, here are the expectations forecast by the economists and researchers of 3 major banks.

Wells Fargo

“We expect the BoE to raise its policy rate another 25 bps to 0.75%, with a further 25 bps hike also seen at the May meeting. By around mid-year, once higher prices start to weigh more meaningfully on consumer purchasing power and perhaps as inflation starts to recede, we do see some slowing in the pace of monetary tightening. Over the balance of the year, we see a further two 25 bps hikes at the August and November monetary policy announcements, which would see the Bank of England’s policy rate finish 2022 at 1.50%. While that would represent a faster pace of rate hikes than we previously envisaged, it would still fall short of tightening currently priced in by market participants, which sees the central bank’s policy rate finishing this year around 2.00%.”

Standard Chartered

“BoE will want to frontload rate hikes to address elevated inflationary pressures, and we continue to see 25bps moves at this week’s meeting and in May. Thereafter we expect the BoE to be more concerned over the growth impact, with the economy likely at risk from recessionary conditions from Q2- Q4. We, therefore, see the base rate climbing to 1.0% and remaining there for the remainder of the year, which is considerably less aggressive than the 6-7 rate hikes priced in by the markets by year-end.”

Credit Suisse

“We expect a 25bp along with 7-2 vote in that direction, with 2 votes for a 50bp hike. With some economists looking at UK inflation pushing close to 10% over the course of 2022, in our view, the BoE has a reasonable case to frontload rate hikes now while it can in order to help contain inflation expectations. Having been of the view that the BoE could deliver a hawkish surprise in both December and February, we are prepared to take this risk again this week and maintain our EUR/GBP 0.8275, target, which should also keep the 1.3000 level intact for GBP/USD. If we are wrong, and the BoE chooses to ignore its inflation mandate as many economists are calling for and delivers a ‘dovish hike’ that sees priced-in hikes dissipate, we would expect GBP/USD 1.3000 to break in short order and we would target 1.2870. Meanwhile, EUR/GBP would quickly test levels above its current 200-day moving average at 0.8472.”