The Bank of England is expected to leave the bank rate on hold at 4.50% on Thursday and to continue to signal that interest-rate cuts in future will be gradual. Focus will be on the vote split, with some policymakers potentially voting to reduce rates. The following is a selection of analyst comments.
BOE Vote Split Could Diverge Sharply
1154 GMT - The vote split at the Bank of England's rate decision on Thursday could again show very divergent views on the economy, though the bank rate is expected to stay on hold at 4.50%, BNY's Geoff Yu says in a note. Taking into consideration a continued rise in fiscal pressures, the overall growth outlook for the U.K. is problematic, the EMEA market strategist says. As recently as January, the domestic economy contracted. A changed outlook would require a large policy offset in due course, he says. "The BOE will likely reiterate its 'careful' stance given external policy volatility but the near-term focus will now shift to the fiscal statement towards month-end," Yu says. The U.K.'s budget statement is due on March 26. (emese.bartha@wsj.com)
Sterling Is Unlikely to Move Much Following BOE Decision
1140 GMT - The Bank of England's decision on Thursday is unlikely to have much influence on sterling as markets have already priced in prospects of interest rates being left on hold at 4.50%, TD Securities analysts say in a note. Instead, sterling will probably be influenced by global developments rather than domestic factors, the analysts say. The BOE's guidance is "likely to remain unchanged and highlight data dependence, with the wording pointing towards continuing 'gradual' cuts," the analysts say. Sterling falls 0.3% against a broadly firmer dollar to $1.0398, but edges up slightly to 0.8403 per euro. (miriam.mukuru@wsj.com)
Bank of England Likely to be Cautious on Rate Cuts
0845 GMT - The Bank of England could prove increasingly shy about lowering interest rates, AJ Bell investment analyst Laith Khalaf writes in a note. The BOE's monetary-policy committee will on Thursday set out its latest decision, with investors expecting it to hold the bank rate at 4.50%. Expectations remain for cuts further ahead. However, those expectations could be tempered if annual inflation comes in stronger than hoped, as well as potential fiscal changes to be set out by the government later this month, he says. The BOE's committee "will be once bitten twice shy when it comes to watching inflation spiral out of control once again," Khalaf says. (joshua.kirby@wsj.com; @joshualeokirby)
Gilt Yields Fall Ahead of Fed, BOE Rate Decisions
0839 GMT - Yields on U.K. government bonds fall as investors await interest rate decisions from the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday. Both central banks are expected to keep interest rates unchanged, with focus on any comments on the economic outlook and the path for future interest-rate cuts. "Investors are watching to see if the [Fed] committee will become more cautious on the U.S. outlook following recent volatility," IG analysts say in a note. The 10-year gilt yield falls 2 basis points to 4.627%, Tradeweb data show. (miriam.mukuru@wsj.com)
U.K. Inflation Likely to Have Outstripped BOE's Expectations
0822 GMT - U.K. inflation is likely to have outstripped policymakers' expectations last month, Pantheon Macroeconomics' Rob Wood and Elliott Jordan-Doak write in a note to clients. Annual inflation for February, due to be reported next week, should have held steady on month at 3.0%, according to Pantheon's estimates. That would mark higher inflation than the Bank of England's own projections for an easing in the rate of prices rises last month. Stronger food and core-goods inflation should stop the headline rate from falling, Wood and Jordan-Doak say. Further ahead, the BOE's hopes for a gradual slowdown in underlying inflation may not come to fruition, the economists warn. The BOE's policy committee will meet Thursday and is widely expected to hold its key rate at 4.50%.(joshua.kirby@wsj.com; @joshualeokirby)
BOE Could Be Nearing End of Rate Cuts
0817 GMT - The Bank of England could be close to the end of interest rate cuts as U.K. inflation is likely to rebound, Berenberg's Andrew Wishart says in a note. The BOE is widely expected to keep interest rates on hold on Thursday at 4.50%, maintaining a gradual pace of rate reductions. U.K. businesses are expected to face significant increase in costs due to rises in minimum wage and employers' national insurance contributions starting in April, likely to be reflected in price increases, Wishart says. "We suspect that the last opportunity to cut interest rates this year will be May 8," lowering the bank rate to 4.25%, he says. (miriam.mukuru@wsj.com)
Inflationary Pressures Likely to Keep BOE Cautious
1612 GMT - U.K. inflation has been stronger than the Bank of England projected and this is likely to keep the central bank cautious, Bank of America analysts say in a note. The BOE is expected to keep rates on hold at 4.50% at Thursday's rate decision. U.K. labor market data was stronger than expected, lowering the possibility of a rate cut in March, BofA says. Money markets price in an 88% probability that the BOE will keep interest rates on hold this week. They price in two 25 basis-point rate cuts later in 2025, LSEG data show. (miriam.mukuru@wsj.com)
Sterling's Outlook Vs Dollar Hinges on U.S. Growth Outlook
1528 GMT - Sterling's ability to extend recent gains versus the dollar will likely depend on the fading narrative of U.S. exceptionalism, Convera strategist George Vessey says in a note. U.S. growth concerns have shifted U.K. and U.S. interest rate cut expectations in favor of sterling, he says. Heightened uncertainty related to U.K. fiscal policy and global trade tensions means the "situation is complex" for the BOE and the central bank is likely to proceed with caution, he says. Given the unclear U.K. backdrop, sterling's fortunes versus the dollar will likely depend on U.S. factors, he says. Sterling falls 0.1% to $1.2974 after briefly reaching a four-month high of $1.3007 earlier, according to FactSet. (renae.dyer@wsj.com)
Markets Likely to Have Muted Reaction to BOE Rate Decision
1454 GMT - Markets could have a muted reaction to the Bank of England's interest-rate decision on Thursday, when rates are expected to be left on hold at 4.50%, Danske Bank analysts say in a note. The BOE is likely to maintain its guidance of gradual and cautious interest-rate cuts, they say. U.K. money markets price in a total of 54 basis points of BOE rate cuts in 2025, LSEG data show, while Danske Bank analysts expect a total of 75bps of rate reductions this year. (miriam.mukuru@wsj.com)
U.K. Budget is Likely To Be Key Focus For Sterling Rather Than BOE
1344 GMT - Sterling's performance this week is more likely to be driven by headlines regarding the upcoming U.K. budget as opposed to the Bank of England's policy decision Thursday, Monex Europe analysts say in a note. Weekend reports suggest U.K. Treasury chief Rachel Reeves could drop plans to freeze disability benefits after receiving a backlash from Labour MPs. This is "in line with our base case for Reeves to underwhelm," the analysts say. That could weigh on sterling as the week progresses with the state of the U.K.'s public finances at the front of mind for traders, they say. Reeves will unveil her spending plans on March 26. (renae.dyer@wsj.com)
BOE Members' Opinions Could Diverge Further at Thursday's Rate Decision
1307 GMT - The Bank of England monetary policy committee members' views on the potential path of future interest rates could diverge further at this week's decision, Lazard's chief market strategist Ronald Temple says in a note. At the previous meeting in February, seven members voted in favor of a 25 basis points interest-rate cut and two members voted in favor of a larger 50 basis-point cut. The BOE is expected to leave rates on hold at 4.50% on Thursday, but recent weak economic data could encourage some policymakers to vote to reduce rates. "Given incremental economic data since February, we could see even more dispersion of views in this decision," he says.(miriam.mukuru@wsj.com)
BOE to Cut Rates Three Times in 2025, Once in 2026, BofA Forecasts
1302 GMT - The Bank of England is expected to hold interest rates at 4.50% at its rate decision on Thursday. Beyond that, however, Bank of America analysts expect the central bank to cut rates three times in 2025, followed by one further reduction in 2026, bringing the terminal rate to 3.50%. U.K. inflation is expected to rebound to close to 3.5% in the third quarter, raising the risk of fewer, rather than more, BOE interest rate cuts, BofA says. Markets price in two more BOE rate cuts of 25 basis points each in 2025, LSEG data show. (miriam.mukuru@wsj.com)
Between Rock and Hard Place, Bank of England Looks Set to Hold Rates
1204 GMT - The Bank of England is treading a fine line but looks increasingly likely to hold off on more cuts to interest rates when its rate-setters meet this week, MHA economic advisor Joe Nellis writes in a note to clients. The U.K. central bank has cut rates more gradually than some counterparts as inflation trends above target. The odds are growing that the policy committee will vote to hold the key rate in place this week, Nellis says. The gathering global trade storm will likely add to the pressures weighing on the U.K. economy, though tariffs could also drive inflation higher too. "A hold on interest rates on Thursday does not rule out cuts later this year," Nellis says. "But any future cuts will be determined by developments in the national and international economies." (joshua.kirby@wsj.com; @joshualeokirby)
BOE Rate Expectations Keep Gilt Yields High
0930 GMT - Markets expect limited interest-rate cuts by the Bank of England and this is keeping gilt yields higher than their developed markets peers, MUFG's Lee Hardman says in a note. Inflation concerns are likely to limit the pace of BOE interest rate cuts, he says. "It will become more uncomfortable for the BOE to keep cutting rates heading into the summer when inflation is expected to temporarily pick up towards 4.0%." Markets expect the BOE to keep its key interest rate unchanged at 4.50% in March and price in two more 25 basis-point rate reductions in 2025, taking the rate to 4.0%, LSEG data show. (miriam.mukuru@wsj.com)
(END) Dow Jones Newswires
March 19, 2025 12:06 ET (16:06 GMT)
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