As BoE meets today, expectations are set for interest rate to remain unchanged at 5.25%. The focal point for investors, however, is any signal from regarding rate cuts. Financial markets have already fully priced in a first 25bps by August, with a 40% probability assigned to such a move occurring as soon as June. Additional reductions are expected later in November or December, lowering the Bank Rate to 4.75% by year-end, with further cuts anticipated in 2025.
The likelihood of BoE providing clear indication today about the timing of these rate cuts remains low. Any hints will be subtly embedded within the voting outcomes and the newly updated economic forecasts. Market predictions suggest an 8-1 voting split, with Swati Dhingra expected to maintain her stance for a rate cut. Meanwhile, hawks like Catherine Mann and Jonathan Haskel are not predicted to shift their positions drastically and return to vote for hike. A significant variable in this equation is whether Deputy Governor Dave Ramsden will align with Dhingra, adding weight to the dovish side.
FTSE surged to new record high yesterday, partly supported by a weaker Pound, and more importantly as the UK economy is clear out of last year’s shallow recession, with strong momentum in the services sector. Technically, near term outlook in FTSE will stay bullish as long as 8111.37 support holds. Next target is 100% projection of 6707.62 to 8047.06 from 7404.08 at 8743.52.
