The Bank of England is expected to keep rates on hold at 5.25% when it announces its policy decision on Nov.
2, and GBP traders are likely to focus on the accompanying monetary policy report, in particular the growth and inflation forecasts.
After the surprise at the September meeting, where the internal BoE members voted in a 5-4 split in favour of a pause, it is likely that the terminal rate has been reached.
A rate pause is fully priced in 0#BOEWATCH.
Whilesurprised on the downside relative to the bank’s August projections, it is likely that the inflation outlook will be slightly upgraded given a weaker currency, firmer oil prices and a lower rate path.
However, disappointing GDP and PMI data can be expected to prompt a downgrade in the growth outlook.
Therefore, risks remain skewed towards a weaker sterling outcome.
Despite the fact that the BoE will likely maintain its tightening bias, thepreferred by BoE Chief Economist Huw Pill suggests that the duration of peak rates matter more and thus emphasises that the BoE are likely done raising rates.
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