Did The Bank of England Miss, Meet or Beat Market Expectations?!
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Summary:
- BoE interest rate decision.
- Any post-decision gains are expected to be sold into and prove fleeting.
- The BoE missed market expectations on Thursday regarding their interest rate hike decision.
The BoE Missed market expectations
The Bank of England (BoE) announced they would raise their central bank interest rate 50bps, missing the market's expectation of 75bps.
The effect of the BoE interest rate hiking decision
It is unclear what the effect of the BoE rising interest rates will have on the pound sterling currency. The exchange rate might increase if the Bank increases interest rates by 75 basis points, which would be the greatest increase since 1989, and shifts its prognosis for the economy. But for a central bank that has a history of falling short of market expectations and emphasizing the downside risks to the economy, this is a huge ask.
The most plausible worst-case scenario would involve the Bank raising rates by less than anticipated (say, 50 bps) and cautioning that the economic outlook is still uncertain and subject to downside risks. The odds favor a downside reaction, according to currency market observers, and any post-decision gains are expected to be sold into and prove fleeting.
A worldwide energy crisis, deteriorating domestic balance of payments, declining stock markets, an unrelentingly strong dollar, and an uncooperative Bank of England have all contributed to the Pound's bad year. The Bank of England's monetary policy is the one area where decision-makers have the power to provide the Pound with some short-term comfort, despite the fact that many of these challenges are medium- to long-term concerns and global in scope. Some of the pessimism and negative positioning may be challenged if the Bank shocks the markets with a more "hawkish" tone, allowing for a short-term leg upward.
A rate increase of 75 basis points plus any improved commentary from the Bank may help the pound that day.
Sources: poundsterlinglive.com
