Markets await the BoE’s Super Thursday
Investors and traders are focused on the Bank of England’s (BoE) “Super Thursday” as most economists expect the central bank to raise borrowing costs, following the Federal Reserve (Fed) and the European Central Bank (ECB) moves.
Market analysts at Deutsche Bank and BNP Paribas told CNBC reporters that the post-meeting statement could give clues as to whether the BoE’s policymakers believe that inflation could return to the 2% target in the next two or three years.
Later today, the US Bureau of Labour Statistics (BLS) will release the April Consumer Price Index (CPI) figures. The crucial inflation report could play a key role in influencing market expectations about the Fed's next monetary policy move.
Bank of England Interest Rate Decision
The BoE’s governing board will announce its interest rate decision on Thursday afternoon. Economists suggest that the UK’s central bank will hike its benchmark interest rate by 25 basis points to 4.50%, in an effort to control rising consumer prices. If the forecast is confirmed, it would be the 12th consecutive rate hike for the BoE.
A Reuters poll showed that economists unanimously forecast a rate hike. However, they suggest that the Monetary Policy Committee will be split 7-2 as not all members will likely agree to tighten monetary policy. It should be noted that two weeks ago, a similar poll by Reuters showed that only a slim majority predicted a rise in borrowing costs.
Market analysts at the Royal Bank of Canada said, “previously we had seen the MPC holding Bank Rate at 4.25% but the April labour market and March CPI inflation data were too much to ignore. As part of keeping its options open, we think the MPC will avoid any reference, explicit or otherwise, to pausing its tightening cycle. Instead, we expect it to retain an overall tightening bias.”
A report released by the Commonwealth Bank of Australia (CBA) said: “Our base case is that this will be the final hike in the cycle. However, the risks lie towards further tightening. We expect the post‑meeting communication to be less hawkish given the extent of the tightening already delivered by the BoE. Financial markets are currently pricing a further 25bp increase beyond this week’s meeting. A less hawkish BoE could pull down market pricing for rate hikes and weigh on the GBP/USD temporarily.”
China April CPI inflation report
The National Bureau of Statistics (NBS) in China will publish its April CPI inflation report. Economists forecast that inflation rose by 0.3% on a year-to-year basis but remained unchanged on a monthly basis. China’s consumer inflation in March dropped to the slowest level in the last 20 months, weighed by sluggish food prices.
Market analysts at Bank of America (BoA) said, “central bankers in China seemed to have little concerns about deflation, judged by the PBoC quarterly monetary policy reports and meeting minutes; expect inflationary pressure to rise as the output gap narrows in 2H23, especially on the back of a new credit cycle kicking off.”
UK GDP in Q1 2023 preliminary report
The Office for National Statistics (ONS) is expected to publish preliminary data regarding the UK’s GDP in the first quarter of 2023. Market analysts expect a 0.1% growth rate figure, on a quarterly basis. Another set of data is expected to show the GDP growth rate coming in at 0.1% in March on a month-to-month basis.
Retail sales and the services sector have proved resilient in the first months of 2023 supporting the country’s economy as it tries to evade recession.
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