BoE after FED, what to expect?
After the dovish stance of FED, now we are going to have the BoE meeting and its monetary policy decisions. The Bank of England' meeting, especially after MPC (Monetary Policy Committee of BoE) members comment in recent weeks that suggesting an interest rate hike to start a bit earlier, including Governor Bailey who said the central bank will "have to act." will be watched now closely.
Now and with an uneven recovery so far, while some analysts expect that the Bank of England (BoE) to deliver an initial 15-bp rate increase today, which would take the policy rate to 0.25%, some others expect that BoE also to follow the FED and just content to more tapering. In the MPC, the consensus is relatively evenly split between Dovish and Hawkish fans, therefore economists expect no change and for the policy rate to remain at 0.10%.
This meeting will not be just about interest rate decisions, BoE also should update its economic projections. Same as other major central banks, BoE also most probably revise its inflation forecasts slightly higher, and GDP lower. Given the uneven recovery and currently increasing but expectations for easing of inflation over time, we expect that BoE rate hikes to be seen in 2022.
Last night, FED held it's meeting, and as a result, they started the tapering, as was widely expected. FED Policymakers unanimously decided to keep the benchmark interest rate unchanged at a low level of 0% to 0.25%, in line with market expectations. In addition, they also announced that, will reduce Bond purchases by $15 billion per month from November. The US Treasury bonds and mortgage-backed securities (MBS) will be reduced to $70 billion (previously $80 billion), and $35 billion (Previously US$40 billion), respectively, and this plan will go on till mid-2020, a bit earlier than previously expected.
While holding rates and increasing the volume of decrease in bond purchases expectation is slight hawkish policy and what market expecting, it can not help the Sterling against its crosses, but it will be positive for GB100. FTSE 100 paused in its bullish trend between the 7240 and 7280, looking after a reason to continue its way higher. For now, in the mid-term chart, technical indicators with RSI at 51 and flat OBV trend line also remain natural. The main support sits at 7,240, and staying above this level or breaching under that can specify its next trend.
