The Bank of England kept the interest rates unchanged as expected today. Furthermore, the voting records indicate that all the members supported the decision with the collective judgment being that it was too soon the gauge the effect of the November rate hike, implying that there was little change in the urgency of the MPC over the next rate hike. Still, the view continued to be the same that as long as the economy continued to perform consistent with expectations, future rate hikes would be required to bring inflation back towards the target rate of 2 percent.
The Committee, in November, was widely agreeing that this was in line with a couple of quarter-point rate hikes in the forecast horizon. This view is in line with the MPC’s longstanding mantra that the rate of future hikes is expected to be restricted and gradual, a view very much reflected in current interest-rate market pricing, where the next hike is not anticipated until the first quarter of 2019, noted Lloyds Bank in a research report.
But, they hinted a readiness to reply to developments in the economic outlook to ensure that inflation returned back towards its target. While the BoE stopped short of revising their views on the economy, they indicated towards some developments that would form part of their updated assessment in the February Inflation Report.
“Assuming that the economic data in the run up to the next meeting remains broadly in line with expectations, the February meeting could see a shift forward in market expectations over the next interest rate hike, from Q1 2019, closer to our own view of Q3 2018”, added Lloyds Bank.
At 15:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 21.389, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -96.7431. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
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