BoE remains cautious for the near future – Commerzbank

Yesterday, members of the Monetary Policy Committee voted eight to one to leave the bank rate unchanged at 5.0%, notes Commerzbank currency analyst Volkmar Baur.

The GBP will remain largely unchanged against the Euro

“The Bank of England has remained somewhat hawkish in its language, which is also in line with our expectation that the Bank of England will be very cautious. Only Swati Dhingra voted in favor of another rate cut, living up to her reputation as a monetary dove. She has voted for a cut at each of the last five meetings and was the lone dissenter at the last rate hike last August.

“So we believe Governor Andrew Bailey has a large majority in favor of his monetary policy and we expect three more rate cuts, one per quarter, which should bring the key rate down to 4.25 percent by the middle of next year. This means that at future meetings the Bank of England will continue to pause the discounting cycle from time to time.”

“This cautious approach, which is also appropriate given the stubbornness of inflation, should support GBP and allow GBP/USD to rise slightly, while we expect GBP to remain broadly unchanged against the Euro over the next several months.”