Synopsis:

BofA anticipates that the Bank of England (BoE) will maintain the Bank Rate at 5.0% during its upcoming meeting, with potential for a more dovish voting pattern.

Key Points:

1. Rate Decision:

   • BofA expects a 7-2 vote to keep the Bank Rate unchanged at 5.0%, with risks leaning towards a more dovish 6-3 outcome.

2. Guidance and Approach:

   • The BoE is likely to reiterate its meeting-by-meeting approach to monetary policy, maintaining current guidance.

3. Quantitative Tightening (QT):

   • An announcement regarding the Gilt stock reduction target, projected at £100bn for the upcoming year, is anticipated. The Gilt sales schedule for 4Q24 will also be outlined.

4. Market Implications:

   • The decisions on Gilt supply will impact debt definition, Gilt liquidity, and the relative scarcity of low coupon Gilts.

5. GBP Outlook:

   • The GBP is benefiting from expectations of higher for longer rates and a structural reset post-election. Despite positioning risks associated with a closer voting pattern, BofA believes the GBP is well-positioned to handle cyclical risks.

Conclusion:

BofA's outlook suggests a stable path for the BoE, with the GBP likely to strengthen amidst ongoing high interest rate expectations and strategic monetary policy adjustments.