The Bank of England (BOE) is widely expected to raise interest rates from record lows Thursday, but market participants will be closely watching for clues on what the U.K. central bank will do next.
This will be one of the BOE’s most significant meetings in some time — not only because of the likely rate move but because of the what the market will glean from this.
The central bank has remained ultra-accommodative in the years since the global financial crash and also introduced U.S.-style quantitative easing (QE) — buying assets to stimulate lending — which is used to stoke inflation and boost the economy. Shortly after the Brexit vote last year it pushed rates even lower, anticipating a sharp decline in consumer spending.
But, the central bank strongly indicated in September that it is ready to reverse this policy of easing, hiking rates from the emergency low level of 0.25 percent — more than a decade after the U.K. saw its last interest rate hike. The bank’s benchmark interest rate is crucial for the economy as it is used to price all sorts of bank loans and mortgages.
In fact, an increase has been so widely telegraphed to occur Thursday that the market has a 25-basis point move priced in with more than 85 percent probability.