Mark Carney, the Governor of the Bank of England
Few minutes ago, the UK government lost the case of activating Article 50 without a parliamentary vote according to the high court in the UK, which eases the chances for a hard Brexit, as the UK MP’s might vote against the government decision. However, all eyes are on the Bank of England decision and the MPC Meeting Minutes today, which should be watched very carefully. As shown on the title, Will the BOE Surprise The Market? The short answer is possible. How? Will explain below
Definition
- BoE Inflation Report: Report provides the BOE’s projection for inflation and economic growth over the next two years. The BOE Governor also holds a press conference to discuss the report’s contents after release.
- Official Bank Rate: Interest rate at which the BOE lends to financial institutions overnight. The rate decision is usually priced in the market, so it tends to be overshadowed by the Monetary Policy Summary, which is focused on the future.
- MPC Official Bank Rate Vote: The vote is reported in an ‘X-X-X’ format – the first number is how many MPC members voted to increase interest rates, the second number is how many voted to decrease rates, and the third is how many voted to hold rates.
Why This Is Important?
- MPC Meeting Minutes: The BOE’s MPC meeting minutes contain the interest rate vote for each MPC member during the most recent meeting. The breakdown of votes provides insight into which members are changing their stance on interest rates and how close the committee is to enact a rate change in the future.
- Monetary Policy Summary: It’s among the primary tools the MPC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.
- Official Cash Rate: Short-term interest rates are the paramount factor in currency valuation – traders look at most other indicators merely to predict how rates will change in the future.
How The BoE Might Surprise The Market
If you were following the economic releases for the past month that were released from the UK, you should probably know that the data showed that the economy is not sliding. In fact, most of the economic releases were positive and better than expected. The surprise that might come from the Bank of England today is to hint for no more easing, and/or an early end of the current stimulus program.
This might happen also through the members vote, where they might be a split between them. A notable split would harm the stock market, as the uncertainty will be all over the place. Yet, for you as a trader, you need to keep an eye on the inflation report first, which should give you some clues about the bank’s projection for inflation during the upcoming months.