Board members at the crossroads.
Bank of England will hold the monetary policy meeting and interest rate decision tomorrow, 05 August. As we saw in other developed economies, we do not have any changes in current record-low interest rates; Monetary Policy Committee members will have a hard day deciding what to do with the asset-buying program amid inflation pressure and the latest concerns Delta variant of Coronavirus.
As other economies in this level of recovery, inflation growing concern is the common obstacle. Last month (June), inflation raised to a three-year high of 2.5%, crossed the BoE`s 2% target. June was the second consecutive month of CPI increasing. This inflation grows, increasing the expectations from board members to tend to strict policies.
After Mr. Haldane left the MPC, two other members have been started having Hawkish comments. Mr. Michael Saunders mentions that "the guidance conditions have now been met," so it may be time to start tapering the bond-buying program. On the other hand, the deputy governor of BoE, Mr. David Ramsden, said that the central bank should review its monetary stimulus.
As the economy is recovering as planned, and the vaccinated rate is one of the highest in the world in the UK, same as RBA, we can expect that MPC members to avoid the infection numbers of Crona various and vote for decrease the bond purchasing amount. So tomorrow, market participants will be focusing on the number of votes for both Hawkish and Dovish policies. However, in the end, respect all that happened and estimates, we do expect that BoE to hold the rates at a historic low of 0.01% as the BoE will need to see more actual evidence of prolonged above-target inflation. Also, we do expect that the bond-buying program to remain at £895bn.
These expected decisions seem more supportive, which is supposed to end with a positive reaction from Market participants and encourage the GB100 bulls in the technical chart, as we can see in the bellow figure.