Despite slower growth, the Bank of England (BoE) has turned more hawkish recently, as inflation has moved higher and the unemployment rate lower. Still, we do not expect a BoE rate hike before some time in 2019: GDP growth has slowed, wage growth remains weak and political uncertainty is high. We still view the core of the Monetary Policy Committee as tilted to the dovish side.
At this meeting, the BoE is expected to vote 6-2 in favour of keeping the Bank Rate unchanged against 5-3 on the previous occasion, as Kristin Forbes (hawk) has been replaced by a new external member.
The central bank is further expected to announce that the Term Funding Scheme will end in February 2018 due to consumer credit growth concerns.
"We expect the BoE to revise down its projection for GDP growth, keep inflation path broadly unchanged while the projection for the unemployment rate is likely to show a stabilisation at around the current level of 4.5 percent," Danske Bank commented in its latest research report.
Meanwhile, the recent leg higher in EUR/GBP has been driven mainly by general EUR appreciation. A 6-2 vote is likely to be interpreted as a modestly dovish signal and thus could trigger a renewed test of the 0.90 level.
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