BoE preview: Key messages for the market – ING

In view of analysts at ING, there is a greater risk of a 6-3 MPC vote split and a third member joining the dissenting ranks this week (likely Chief Economist Andy Haldane) and in this scenario, he would expect the odds of a November BoE rate hike to increase to 50:50.

Key Quotes

“Expect BoE to signal explicit concerns over the UK rate curve being too flat, the intent being to realign the currently benign market expectations with the narrative of a gradual tightening path over a 2-year horizon.”

“Inflationary pressures from renewed GBP weakness may, for some MPC members, tilt the growth-inflation policy trade-off in favour of an earlier than anticipated reversal of the post-Brexit emergency monetary stimulus.”

“The combination of more robust UK inflation signals in the latest round of CPI and labour market data releases - as well as a hawkish tilt at the September BoE meeting - could mark a positive turning point in GBP sentiment.”

“We are now starting to see the risk premium related overshoot in EUR/GBP unwind; a hawkish hold at this week's BoE meeting could fuel a further correction towards - and potentially below - the 0.90 level, which would almost certainly shelve any EUR/GBP 'parity' fears for now.”