The Bank of England is set for a key policy decision Thursday, and could opt to pause its long series of rate hikes, following a surprise pullback in inflation and indications that central banks around the world are nearing the peak of their hard money cycle.
Markets are split as to whether the Bank of England will lift its key Bank Rate by a quarter of a percentage point later this morning in London, taking it to a multi-decade high of 5.5%, or hold it stead at 5.25% following a softer-than-expected reading for August inflation and a rate hike pause from the European Central Bank last week.
Another surprise pause, this time from the Swiss National Bank – which left its key rate unchanged at 1.75% earlier this morning – could also compel the Bank of England to adopt a wait-and-see approach as growth metrics deteriorate and inflation shows signs of easing.
“It is a close call, and the BoE may also draw its own conclusions from market reactions to the European Central Bank’s dovish hike and the Fed’s hawkish hold earlier,” said ING analyst Padhraic Garvey.
Headline CPI eased to 6.7% last month, Britain’s Office for National Statistics said Wednesday, and although the rate remains nearly triple the Bank’s 2% forecast, it is quickly moving closer to the 5% level that officials have penciled in for the coming months.
Britain’s economy shrank by a more-than-expected 0.5% in July, the ONS said last month, thanks in part to a series of rail and health sector strikes as well as one of the wettest summer months on record that hit the nation’s retail sector.
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