BOE set to wrap up the major central bank bonanza for the year

In case you missed the events from earlier:

• The Federal Reserve cuts rates by 25 basis points, as expected
• FOMC December 2024 dot plot and central tendencies of economic forecasts
• Powell opening statement: Inflation is much closer to 2% goal
• Powell Q&A: Today was a ‘closer call’ but we decided it was the right call
• Bank of Japan leaves rates unchanged, as expected
• Bank of Japan comprehensive review on past monetary easing steps
• Recapping the Bank of Japan monetary policy decision today – rates unchanged again

That leaves the BOE as the final major central bank policy decision for the year. But unlike the Fed and BOJ, this one should be a more uneventful and straightforward one.

The BOE is expected to keep the bank rate unchanged this time around and stick with their ongoing communique. That being “a gradual approach to removing policy restraint remains appropriate”.

They will continue to emphasise that on the balance of risks, they can’t move too quickly in cutting rates. And that there is still work to be done on the inflation front, although the disinflation process remains on track.

All in all, it shouldn’t be anything too new for sterling. Traders have fully priced in a decision for the BOE to keep the bank rate on hold. But looking out to next year, there is ~51 bps of rate cuts priced in. So, that will be the main thing to watch in the aftermath depending on the policy language.

However, as noted above, I doubt this is the time for the BOE to be making waves. But they might drop a couple of hints on the price outlook, wages, and economic developments. So, we’ll see. Otherwise, things should play out quite straightforward.

In terms of the bank rate decision, it is widely anticipated that we will see a 8-1 vote in favour of keeping rates unchanged. The only dissenter should be Dhingra in favour of a 25 bps rate cut.

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