Eyes on BOE after weak inflation data

The Bank of England (BOE) will announce its interest rate decision at 14:00 today. Investors are pricing in a 25 basis point rate hike for this year with a 100 percent probability. However, after the inflation data announced on Wednesday, it is being debated whether this increase will come at today's meeting. According to the announced data, consumer inflation in the country fell to 6.7 percent and was at its lowest level in 18 months. In the Bloomberg survey, where almost all economists expected an interest rate hike at the beginning of the week, the balances changed when economists from major institutions such as Goldman Sachs and Nomura withdrew their interest rate hike estimates. Nevertheless, the median expectation of 57 economists participating in the Bloomberg survey is for the policy rate to be increased by 25 basis points to 5.50 percent. The pricing in the market indicates a 50 percent probability that the interest rate will remain unchanged at this meeting. If this pricing occurs and the interest rate remains unchanged, the BOE will have paused the tightening steps it started at the end of 2021 for the first time. Some economists and BOE officials have pointed to concerns about a slowdown in the economy and a recession, while others say pausing interest rates would be a premature declaration of victory on inflation. “It is too early for the Bank of England to be confident that the current level of interest rates – even if held for longer – will be sufficient to return inflation to target,” said Kim Crawford, global rates portfolio manager at JPMorgan Asset Management.