BoE Preview: Three scenarios and their implications for GBP/USD – TDS

Economists at TD Securities discuss the Bank of England Interest Rate Decision and its implications for the GBP/USD pair.

Hawkish Hold (25%)

The MPC votes to leave policy on hold but with two or three hawkish dissents. The MPC's asymmetric hiking guidance is tweaked only marginally, saying that ‘further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.’ GBP/USD +0.70%.

Neutral Hold (60%)

The MPC leaves Bank Rate unchanged in a 9-0 vote (or perhaps with an unsurprising dissent from Dhingra and/or Mann). Inflation is revised down to reach target by 24Q2 but is revised up a little in 2025/26. Notably, the explicit, asymmetric threat to hike further is removed, leaving risks two-sided. Instead, the MPC offers guidance that Bank Rate remains ‘at an appropriate level’, and that any future policy change will be made taking on board the latest data. GBP/USD +0.25%.

Dovish Hold (15%)

Guidance is overhauled completely, with the MPC saying that past policy hikes have achieved their goal of bringing inflation back toward target and that the next rate move will now be a cut rather than a hike. GBP/USD -1.00%.