Bank of England Forecast: Three scenarios and their implications for GBP/USD – TDS

The economists of TD Securities analyze the Bank of England's interest rate decision and its implications for GBP/USD.

Maintaining the hard line (25%)

The Monetary Policy Committee votes to maintain monetary policy, but with two or three hard-line dissenters. The Monetary Policy Committee's asymmetric guidance is modified only marginally, saying that “further tightening of monetary policy would be necessary if there was evidence of more persistent inflationary pressures” GBP/USD +0.70%.

Neutral posture (60%)

The Monetary Policy Committee leaves bank rates unchanged in a 9-0 vote (or perhaps with a surprising dissent from Dhingra and/or Mann). Inflation is revised downwards to meet target in 24Q2, but revised slightly upwards in 2025/26. In particular, the explicit and asymmetric threat of a new rise is suppressed, leaving the risks on two sides. Instead, the Monetary Policy Committee indicates that the bank rate remains “at an appropriate level”, and that any future changes in policy will be made taking into account the latest data. GBP/USD +0.25%.

Moderate attitude (15%)

The Monetary Policy Committee completely revises its guidance and says that previous rate hikes have achieved their goal of bringing inflation back to its target level, so the next rate hike will be a cut rather than an increase. GBP/USD -1.00%.