BoE is widely expected to keep monetary policy unchanged today, with Bank rate held at 0.1% and asset purchase target at GBP 895B. New economic projections will also be released. But the major focus will be on rhetorics regarding negative interest rates.
Governor Andrew Bailey has recently noted that it might be premature to implement negative rates. For instance he suggested that there are “lots of issues” with negative rates and policymakers have “not actually discussed” the issue yet. Chief Economist Andy Haldane expected the economy to recover at “a rate of knots” from Q2. Brexit risks were also cleared. The hurdle for the divided committee to reach a consensus on using negative rates seem too high.
Here are some BoE previews:
- BOE Preview – Awaiting Updates on Negative Rate Policy and Economic Projections
- Will the Bank of England Embrace Negative Rates?
- Bank of England: Cautiously Optimistic With Negative Rates Still On The Table
Sterling’s rally has been losing much momentum ahead of BoE rate decision, even against the weak Euro. We’ll see if more sell-on-news movement would happen after BoE affirms its stance on negative rates. In particular, break of 0.8917 minor resistance in EUR/GBP confirm short term bottoming and bring stronger rebound, probably dragging Sterling down elsewhere too.
