BoE Interest Rate Decision (March 2019)


Posted on: 2019-03-21 (Day) By BCR Market Event


 

Is It All About Brexit?

The Bank of England held their interest rate decision on February 7th, with the nine BoE policy makers 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

21 Mar 2019                       0.75%                   0.75%

07 Feb 2019                        0.75%                   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%

 

 

Opportunities can be found in the statement

 

Inflation Rate

“CPI inflation fell to 2.1% in December and is expected to decline to slightly below the MPC’s 2% target in the near term, largely due to the sharp fall in petrol prices which has occurred since November. As that effect unwinds, CPI inflation rises above 2%. The MPC judges that demand and potential supply are currently broadly in balance. The weaker near-term outlook is likely to lead to a small margin of slack opening up this year. Thereafter, demand growth exceeds the subdued pace of supply growth and excess demand builds over the second half of the forecast period. As a result, domestic inflationary pressures firm, as the upward pressure on inflation of sterling’s past depreciation wanes. Under the assumptions that condition the February Report, inflation settles at a rate a little above the target.” Referring to BoE’s Inflation Report.

The annual inflation rate rose to 1.9% in February from a 2-year low of 1.8% in the previous month, and above market expectations. Meanwhile, the inflation rate is slightly below the MPC’s 2% target in the near term. Therefore, BoE has no reason to change any monetary policy at the time.

UK Inflation Rate (%)

 

GDP

 “UK economic growth slowed in late 2018 and appears to have weakened further in early 2019. This slowdown mainly reflects softer activity abroad and the greater effects from Brexit uncertainties at home. These uncertainties could lead to greater-than-usual short-term volatility in UK data, which may therefore provide less of a signal about the medium-term outlook. In the Committee’s central projection, quarterly GDP growth recovers later this year, with four-quarter growth rising to 2% by the end of the forecast period.” Referring to BoE’s Inflation Report.

The GDP (YoY) in the UK expanded 1.3% as expected in the Q4 of 2018, this has beaten by the market’s preliminary expectations of 1.4%. Uncertainties remain from external global economies. Meanwhile, 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 (%)

 

Jobs report

The unemployment rate decreased to 3.9% in January from 4% in prior month, remaining close to it’s the lowest reading since 1975 which is the 44-year low. 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

The British pound rallied against the greenback after reaching 1.3365 barrier. The GBPUSD pair continues pulling back during this week. In the 4 hours timeframe, indicators lost their bullish momentum for both MACD and RSI. However, the price is still moving above the upward trendline. As the price is dropping in the short run, perhaps it is trying to gain enough bullish momentum to break 1.3365 barrier. For now, focus on 1.3364 barrier and the upward trendline to find out the direction whichever point South or North. In addition, Brexit is another massive bomb to the UK economy, keep an eye on Brexit as well.

GBPUSD H4 Chart