BoE Interest Rate Decision (February 2019)


Posted on: 2019-02-07 (Day) By BCR Market Event


 

Is It All About Brexit?

 

The Bank of England held their interest rate decision on December 20th, with the nine BoE policymakers decided to hold the cash rate at 0.75% unchanged. For today’s decision meeting, the market is widely expecting the monetary policy to remain on hold at the meeting with the Inflation Report set to highlight Brexit uncertainties.

Bank of England Interest Rate (%)

 

 

BoE Interest Rate Announcement History

Date                                      Previous              Consensus          Actual

07 Feb 2019                        0.75%                   0.75%

20 Dec 2018                        0.75%                   0.75%                  0.75%

01 Nov 2018                        0.75%                   0.75%                  0.75%                   

13 Sep 2018                        0.75%                   0.75%                  0.75%     

02 Aug 2018                        0.5%                     0.75%                  0.75%

21 Jun 2018                         0.5%                     0.5%                    0.5%

10 May 2018                       0.5%                     0.5%                    0.5%

22 Mar 2018                       0.5%                    0.5%                     0.5%

08 Feb 2018                        0.5%                     0.5%                    0.5%

14 Dec 2017                        0.5%                     0.5%                    0.5%

 

 

Opportunities can be found in the statement

 

Inflation Rate

“The Committee judged in November that, were the economy to develop broadly in line with its Inflation Report projections, which were conditioned on a smooth adjustment to the average of a range of possible outcomes for the UK’s eventual trading relationship with the European Union, a margin of excess demand was expected to emerge. In that context, an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2% target at a conventional horizon.” Referring to BoE’s Inflation Report.

The annual inflation rate is showing a reading of 2.1% in December which refreshes 2 years low, in line with market expectations. However, the inflation rate meets the MPC’s target of 2%. Therefore, BoE has no reason to cut the interest rate any lower.

UK Inflation Rate (%)

 

GDP

 “The MPC projects four-quarter GDP growth to remain around 1.75%. That projection is similar to the August forecast. Within demand, consumption growth is projected to be modest relative to historical rates, but net trade and business investment support growth, conditioned on the assumption of a smooth withdrawal from the EU and an accompanying decline in uncertainty.” Referring to BoE’s Inflation Report.

The GDP (YoY) in the UK expanded 1.5% as expected in the Q3 of 2018, unrevised from the preliminary estimate and up from 1.4% in the prior period. Uncertainties remain from external global economies. In response to the process of Brexit, the economic outlook of households, businesses and financial markets will be influenced significantly.

UK GDP Annual Growth Rate (%)

 

Unemployment Rate

“Domestic inflationary pressures have continued to build. The labour market remains tight, with employment growth picking up in the latest data and the unemployment rate likely to stay around 4% in the near term.  Annual growth in regular pay has risen to 3.25%, stronger than anticipated in the November Report.” Referring to BoE’s Inflation Report.

The unemployment rate decreased to 4% in November from 4.1% in prior month, remaining close to it’s the lowest reading since 1971. In the jobs report, wages have finally started rising faster than the inflation figures. Most importantly, wage growth accelerated to 3.4%. Even though the labour market remains tight, the sterling is still unable to get away from the pain of Brexit.

UK Unemployment Rate (%)

 

 

Technical View

Last week, the GBPUSD fell from 1.3216, which is the 14 weeks high. In the H4 timeframe, MACD continues to gain bearish momentum, RSI is testing the oversold territory. The price is moving below the MA system, which means the sterling opened the gate for the bearish trend in the short run. Focus on 1.2821 support level for the movement in the upcoming days.

GBPUSD H4