Standard Chartered’s Christopher Graham expects the Bank of England to leave interest rates unchanged at its March 19 meeting, with a 7-2 split as two members are likely to support a 25 basis point cut. The bank appears to be analyzing the short-term energy shock while monitoring risks in the Middle East, worse UK labor data and lessons learned for 2011 and 2022. Further monetary policy easing is forecast, but the timing is uncertain.
The BoE remains at a cautious level
“We expect the Bank of England (BoE) to keep interest rates unchanged at its policy meeting on March 19, with seven members voting to hold and two members (likely Taylor and Dhingra) voting for a 25 basis point cut.”
“However, the minutes will highlight how each member of the Monetary Policy Council (MPC) assesses the risks associated with conflict in the Middle East.”
“While we expect the BoE to manage the short-term energy price shock, doves may emphasize the risks of deterioration in economic growth, and hawks are likely to focus more on the risks of rising inflation.”
“We believe the case for the BoE to raise rates is weaker, partly given that it has cut interest rates so far this cycle and at least some MPC members likely still view interest rates as restrictive.”
“Moreover, the UK labor market is showing more obvious signs of weakening, with unemployment rising steadily from mid-2022 and wage growth slowing from mid-2023 (the next batch of data will be published on March 19, before the BoE meeting). The conclusions from 2022 and 2011 may shape the BoE’s response function.”
“We still see further easing from the BoE (we forecast a final interest rate of 3.00%), but the timing of these cuts is highly uncertain and under review – while a short-term cessation of hostilities and lower energy prices could allow our current cut schedule (once a quarter from Q2 onwards), there is a growing risk that a prolonged rise in energy prices could push the next cut into the second half or 2027.”
(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)
