How can the BOE surprise in today’s policy decision?

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<p style=““ class=“text-align-justify“>The market is firmly expecting a 50 bps rate hike but as mentioned earlier in the day <a target=“_blank“ href=“https://www.forexlive.com/news/the-central-bank-bonanza-continues-later-today-20230202/“ target=“_blank“ rel=“follow“>here</a>, it might not be quite a straightforward one when it comes to the BOE as opposed to the ECB today.</p><p style=““ class=“text-align-justify“>We’ve already seen dissenters in the December meeting <a target=“_blank“ href=“https://www.forexlive.com/centralbank/boe-raises-bank-rate-by-50-bps-to-350-as-expected-20221215/“ target=“_blank“ rel=“follow“>here</a> and that might set up for a bit of a risk that today’s decision might surprise with a 25 bps rate hike instead. Since the last meeting, UK economic data has worsened with retail sales imploding and recession risks continue to be on the rise as the cost-of-living crisis intensifies.</p><p style=““ class=“text-align-justify“>I would expect policymakers to want to figure out a balance between maintaining some degree of hawkishness as they finish off the tightening cycle, and also needing to slow things down as they risk sending the economy off the rails.</p><p style=““ class=“text-align-justify“>Quite frankly, the most surprising thing that the BOE could do today is to put forward a hawkish 50 bps rate hike. However, I’d rate the odds of that as being pretty low among all the likely outcomes. As for a 25 bps move, I think that is certainly a possibility somewhere in the region around 35:65 when pitted against a 50 bps rate hike today.</p>

This article was written by Justin Low at www.forexlive.com.

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