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Dec 13 - 12:55 PM

GBP: Back To 50bp As BoE Nears End Of Hiking Cycle; Expecting A More Dovish Stance On Thurs - Danske

By eFXdata  —  Dec 13 - 10:45 AM

Danske Research discusses its expectations for the BoE December policy meeting on Thursday.

"We expect the Bank of England (BoE) to hike the Bank Rate by 50bp on 15 December bringing it to 3.50%. Markets are currently pricing slightly above 50bp for the meeting this week (55bp). As a result of a more balanced fiscal policy, market conditions have cooled off and broadly returned to conditions we saw prior to the mini-budget. We thus expect a return to slower hiking pace," Danske notes. 

"We expect the Bank to return to its more dovish stance as recession risks are becoming more pronounced and the growth outlook is increasingly becoming weaker. This was highlighted by the MPC's latest projections, which described a very challenging outlook for the UK economy, where it now expects the UK "to be in a recession for a prolonged period." The BoE's November Decision Maker Panel also shows that broad inflation expectations dropped with participants expecting CPI inflation to be 7.2% one-year ahead, down from 7.6% in the October survey. Additionally, the BoE tends to ear on the side of caution, why we expect the return to a 50bp hike," Danske adds. 

Danske Research/Market Commentary


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