Heads up, pound traders! Word through the forex grapevine is that the BOE is set to boost its easing efforts during this week’s policy statement.
Head honcho Andrew Bailey and his fellow policymakers are scheduled to announce their decision on June 18, 12:00 pm GMT and also release the minutes of their meeting then.
What happened before?
In last month’s policy decision, the BOE agreed to keep interest rates and its asset purchase program unchanged.A couple of members namely Saunders and Haskel voted in favor of increasing their easing efforts by 100 billion GBP, but they were outnumbered by other MPC members who wanted to stand pat.
Still, the statement highlighted how economic performance has taken a huge hit from the pandemic but reiterated that the current monetary policy stance was appropriate.
The last time the BOE boosted its asset purchase program was in March when they stepped it up by 200 billion GBP. Back then, it took the total holdings to 645 billion GBP, which would run out by July if the central bank carries on with its current pace of purchases.
What’s expected this time?
No actual changes to interest rates are expected for now, but the rest of the MPC are likely to join Saunders and Haskel in calling for an increase in asset purchases.
Market expectations for the size of the expansion vary, with conservative estimates staying at 100 billion GBP. This should be enough to keep asset purchases running until early September, giving the central bank room to decide if they want to announce another increase by August.
More aggressive forecasts are counting on another 200 billion GBP boost, which could allow purchases to continue all the way until October or November.
One factor that tilts the odds in favor of a larger increase is the dismal April GDP report, which reflected a whopping 20.4% month-over-month contraction.
The minutes of their meeting should contain more insights on this policy option, and any indication that more members are willing to pursue negative rates might mean plenty of downside for the pound.