Barclays: BOE rate hike expectations and voting split projection for Thursday's meeting

<figure data-media-><img src="https://images.forexlive.com/images/boe%20Bank%20of%20England_id_a432c68c-c761-404f-93cb-cf5bc6a32614_size900.jpg" alt="boe Bank of England" width="1024" height="576" wrapper-="wrapper-" data-src="https://images.forexlive.com/images/boe%20Bank%20of%20England_id_a432c68c-c761-404f-93cb-cf5bc6a32614_size900.jpg" /></figure><p>Barclays Research continue to expect 50bps hike from the BoE at tomorrow's meeting.</p><p><strong>Main Points</strong>:</p><ol><li><p><strong>Rate Hike Expectation</strong>: Barclays reiterates its
expectation for a 50 basis points (bps) rate hike by the Bank of England
(BoE) in the upcoming meeting scheduled for 3 August. If their
prediction holds true, this would take the Bank Rate to 5.5%.</p></li><li><p><strong>Rationale for the 50bps Hike</strong>: Barclays believes the
BoE's decision to hike by 50bps in June indicates a strategic shift in
the bank’s reaction function. They attribute this shift to:</p><ul><li>Signs of sustained second-round effects on inflation.</li><li>The BoE's opportunity to fortify its credibility in managing inflation.</li><li>Risk management considerations.</li></ul></li><li><p><strong>Voting Split Projection</strong>: The bank forecasts an 8-1
split in favor of the 50bps rate hike versus maintaining the current
rate. They expect Dhingra, an external member of the Monetary Policy
Committee, to remain a dissenting voice, advocating for unchanged rates.</p></li><li><p><strong>Forward Guidance</strong>: Barclays anticipates that the BoE
will not alter its forward guidance. The current guidance already
communicates a conditional stance on the possibility of further rate
hikes.</p></li></ol><p><strong>Summary</strong>:</p><p>Barclays maintains its stance that the Bank of England is poised for
another 50bps rate hike in its forthcoming meeting on 3 August, taking
the Bank Rate to a projected 5.5%. This expectation is grounded in
recent shifts in the BoE's policy response, growing concerns about
inflationary pressures, and the opportunity for the central bank to
bolster its inflation-combatting reputation. The anticipated voting
pattern reflects a strong consensus for the hike, with only one expected
dissent. The forward guidance from the BoE, as per Barclays, will
likely remain consistent with its current stance.</p><p>Market pricing is currently at 66% for 25 bps and 33% for 50 bps.</p><p>For bank trade ideas, <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1691089028736000&amp;usg=AOvVaw34T42xx_ygLXlCoku4RouE">check out eFX Plus</a>. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1691089028736000&amp;usg=AOvVaw34T42xx_ygLXlCoku4RouE">Get it here</a>.

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This article was written by Adam Button at www.forexlive.com.