The Bank of England is expected to maintain its interest rate at 5.0% in the upcoming September meeting. The UK’s annual inflation was steady at 2.2% in August, and the BoE’s policy announcements are likely to impact the Pound Sterling. While there won’t be a Monetary Policy Report or a press conference in this meeting, the market will closely watch for any signals about the future policies of the central bank.
The focus of the September policy meeting will be on the key interest rate and the language in the policy statement, along with the voting composition of the Monetary Policy Committee. The BoE is expected to stick to a cautious stance on easing due to elevated services inflation in the UK. The announcement will come ahead of the Autumn Budget from the new Labor government, which may influence the central bank’s decision.
In August, the BoE lowered the key policy rate by 25 basis points, and the vote was split at 5-4. The recent inflation data shows the Consumer Price Index rose at an annual rate of 2.2%, slightly above the central bank’s target. There are concerns about services inflation and wage growth, which might influence the BoE’s decision on the policy path and forward guidance in the upcoming meeting.
Althea Spinozzi, Head of Fixed Income Strategy at Saxo Bank, expects the BoE to keep rates steady in September due to persistent inflation and wage growth. Market participants will also be watching for any announcement of further selling of gilt holdings by the central bank. The decision will impact the GBP/USD pair, with a hawkish hold likely to boost the Pound Sterling towards 1.3300, while a dovish tone could push it lower towards 1.3000.
Technical analysis for GBP/USD suggests upside potential if the pair maintains its foothold above key levels. A breakout above 1.3250 could lead to further gains towards multi-year highs. On the downside, a break below the 21-day Simple Moving Average at 1.3153 could signal a correction, with support expected around the July 17 high of 1.3045.
Overall, the Bank of England’s interest rate decision will be closely watched by the market for any hints on future policy actions. The outcome of the meeting will impact the Pound Sterling and GBP/USD pair, with traders looking for signals of the central bank’s stance on inflation, services inflation, and wage growth in the UK economy. The decision will provide insights into the BoE’s approach towards monetary policy amid the challenging economic environment.
