Central Banks Showdown: ECB vs. BOE

In this European edition of the Central Banks Showdown, we’ll be focusing on the latest policy statements from the ECB and the BOE. Which central bank was more upbeat than the other this time?

Bank of England

british pound boeAs expected, BOE policymakers decided to keep interest rates on hold at 0.50% and asset purchases unchanged at 375 billion GBP. Their official press statement didn’t contain much details regarding this particular monetary policy decision, leaving forex traders to wait for the minutes of the meeting to be released later on.

Recent data from the U.K. economy suggests that the monetary policy committee probably maintained their relatively optimistic stance for now, as employment figures have once again surprised to the upside and wage growth continues to outpace inflation. Based on Carney’s upbeat tone in the BOE Inflation Report hearings, it’s likely that the central bank head would reiterate that its next move is likely to be a rate hike. It remains to be seen whether other members of the MPC share this view.

European Central Bank

Since the ECB has pretty much used up all the monetary policy ammunition in its arsenal, Governor Draghi and his men refrained from taking any action in their latest rate statement. He did confirm that the ECB’s massive QE program announced back in January would officially start next Monday and would carry on for the next 18 months.

Another interesting takeaway from this event was that the central bank decided to upgrade its economic forecasts, predicting that the economy would expand by 1.5% this year from a previous estimate of 1% growth. Aside from that, they also raised their 2016 GDP forecast from 1.5% to 1.9%. Talk about optimism, huh?

Then again, a few recent economic reports from the euro zone support Draghi’s positive outlook. Retail sales surged 1.1% in January, outpacing the consensus of a feeble 0.2% uptick, while headline CPI actually came in better than expected with a 0.3% dip instead of the projected 0.5% drop.

While this provided a bit of support for the euro, forex market watchers appear to be taking the ECB’s rhetoric with a grain of salt. I mean, is the ECB really announcing upgrades after China just cut rates and lowered its target growth rate?!

What’s your take on these central bank statements? Do you think Draghi or Carney are being overly optimistic? Don’t be shy to share your thoughts in our comments section!