Thursday preview: BoE expected to keep interest rates unchanged

The Bank of England is expected to stand pat on interest rates when it announces its latest policy measures on Thursday.

The market has anticipated the BoE will leave interest rates at 0.50% and the asset purchase programme at £375bn.

Low inflation, weak wage growth and a slowing global economy are likely to be factors the BoE has taken into consideration when determining its next move.

Uncertainty surrounding the referendum on Britain’s membership in the European Union on 23 June is also expected to be taken into account.

“The sharp drop in sterling since the end of last year will offset some of the drag on inflation stemming from soft commodity prices and could hasten the recovery in the UK CPI inflation,” said Rabobank.

“This factor combined with the better tone of oil prices suggests that the resident hawks at the Monetary Policy Committee could be indicating a preference for a rate hike in the second half of this year.”

However, Rabobank said a combination of disappointing wage growth, weak gains in productivity and political uncertainty suggests that the majority of the committee may favour a cautious approach to policy.

“Consequently we have delayed our forecast for the first hike in BoE rates from November 2016 to February 2017.”

The BoE’s policy announcement comes a week after the European Central Bank decided to slash all key rates and expand its asset purchase programme. The Bank of Japan on Tuesday, on the other hand, decided to leave policy unchanged.

The Federal Reserve is also expected to keep interest rates on hold when it announces its measures at 1800 GMT.

Thursday 17 March

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