The Bank of England is predicted to leave its interest rate unchanged on "Super Thursday" and substantially raise its growth forecasts. Speculation is mounting about the BoE's bond-buying scheme, with some predicting that Governor Andrew Bailey and his colleagues will announce they are tapering down on bond buys.
Here you can find the expectations as forecast by the economists and researchers of nine major banks.
GBP/USD is clinging to 1.39 amid this event – which could become a sterling suffer-fest, according to FXStreet’s Analyst Yohay Elam.
ING
“We expect a series of upgrades to the BoE’s forecasts, including a bigger rebound in 2Q and a lower peak in unemployment. This encouraging outlook potentially means the Bank will take the opportunity to taper the pace of its asset purchases. At face value, this should come as no surprise – the BoE has already told us it will be doing this at some point. Policymakers expect to wrap up the remaining amount of gilt purchases around the end of the year, but at the current £4.4 B weekly pace, it will get there months earlier. A cut in the weekly buying pace to roughly £3 B/week from now onwards would allow the Bank to reach its target holdings of £875 B worth of government bonds around the end of the year.”
TDS
“We look for the BoE to keep policy unchanged, punting any decisions on QE to the next meeting on 24 June. This would leave more focus on the macro forecasts, and specifically, where the BoE sees inflation in 2-3 years. However, there is also a strong chance that the MPC comes to a decision on the future of QE at the May meeting, in which case we look for a £90 B increase in the APP, so it can continue the current £60 B/quarter purchase pace through to the end of the year. We don't think that the macro justification is there for the BoE to start winding down QE so soon, leaving it as one of the most hawkish G10 central banks.”
Nomura
“We expect the BoE to do the same and (informally) guide the market towards a slowdown in weekly purchases from £4.4 B to £2.5 B in early autumn (September). Elsewhere, we see an outside chance of the Bank updating the markets on sequencing (whether it will start to wind down the QE portfolio before hiking rates, when the time comes), its plans to incorporate negative interest rates and tiering into its toolkit, and the technical parameters of the asset purchase programme. Aside from a smaller fall in output in Q1 than previously expected, we don't expect the Bank to raise its forecasts for GDP growth materially, which were already optimistic in February in assuming output would be back to pre-pandemic levels towards the end of this year. We also think the Bank will retain its generally above-target inflation view for 2022-23, notwithstanding its review of the supply side of the economy at this meeting. Otherwise, we see the main policy levers of Bank Rate and the size of the asset purchase scheme being left unchanged at 0.10% and £895 B, respectively.”
Deutsche Bank
“We don’t expect any change to their policy settings. In terms of when they might begin to taper their QE operations, we think it’s a close call between May and June, but ultimately the BoE will wait until June.”
Rabobank
“We don’t expect any direct changes to the Bank’s policy settings. The economy has commenced its recovery from COVID-19, the government’s fiscal position improves, and cost pressures are rising. Even as it would want to avoid calling this ‘tapering’, the BoE could therefore be the next central bank in line to reduce its monetary stimulus. Since its bond-buying is well ahead of schedule, we would interpret any pivot towards lower stimulus as mostly tactical rather than a significant shift in policy stance. The longer the wait, the sharper the pivot. We would, therefore, expect the Bank to flag this risk and to actually slow purchases from the June meeting onwards.”
Citibank
“We expect the Bank to be on hold. Citi analysts continue to expect a £50 B QE extension in November. Bank’s forecasts are likely to see significant upgrades to near-term growth. Extension of furlough and a stronger rebound suggests the Bank may conclude unemployment has peaked. We expect inflation to be revised up for 2022 but down in 2024 as fiscal drag weighs in the latter part of the horizon.”
UOB
“We are likely to see the BoE’s policy rate at current level with further quantitative easing (QE) announced later this year. We do not expect interest rates to begin normalizing before the end of 2022, whilst any downside could see the policy rate cut to zero alongside further increases to the scale of the ongoing QE programme.”
OCBC
“The BoE is expected to keep its bank rate and asset purchase target amount unchanged. There is a possibility for a plan to taper the weekly purchases, to avoid an early end to the purchase program. SONIA pricing is already hawkish; any tapering intention to bring down the weekly amount to a level above £3.0 B appears unlikely to push the market further. A weekly purchase of £3.0-3.5 B means another taper is probably required later in the year for the program to run through year-end.”
Danske Bank
“The Bank of England meeting should not bring any new policy signals, but keep an eye on the updated growth and inflation forecasts to be released. What is most interesting is whether we will get any new guidance on QE, which is set to expire by the end of the year.”
