4 min readThe BoE voted to leave rates unchanged at 3.75% in line with expectations and following a 25 bps rate reduction in December. The vote split was 5-4, with 5 voting to leave rates on hold and 4 voting to cut rates. The vote split was more dovish; expectations had been for just 2 dissenters
The central bank lowered its GDP forecast for the year to 0.9%, and the CPI outlook was also downwardly revised. The BoE expects further weakening in the labour market, with unemployment expected to rise while wage growth is set to cool.
The more dovish vote split, combined with a deteriorating economic outlook, suggests the BoE is leaving the door ajar for a March rate cut. There are two rounds of jobs data before the next meeting, which could confirm whether businesses are increasing layoffs.
The market is pricing in 44 basis points worth of rate cuts by the end of the year, up from 36 basis points ahead of the announcement. The first cut is fully priced in for April, but could come as soon as next month. Following the decision, gilt yields and the pound are falling.
GBP VS DOLLAR (GBP/USD):
If we take a closer look at the technicals, we can observe how price was trading just above 1.3585 before the announcements, and post the decision GBP/USD slipped to 1.3560. On the four hour chart. GBP/USD broke below the 50 SMA and is heading towards the 200 SMA at 1.3525. A break below here and the rising trendline could see sellers gain traction.
FTSE 100 (UK100):
The FTSE 100 has also seen a smaller impact from this BoE interest rate decision. Before the announcement, the price was trading around 10370, and currently, it is trading just above 10360, marking a modest fall. The FTSE trades in a rising channel but has pulled back from its record high. Buyers will look tohold above the mid point of the channel to extend gains towards 10,450 and fresh record highs. Support is seen at 10,330, the channel mid-point. A break below 10,245 creates a lower low.
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