The Bank of England is set to raise its policy interest rate by 25 basis points at 12:00 BST on Thursday, bringing Bank Rate to 1.25%. Given this is widely expected by economists and markets alike, the focus will shift from the hike itself to the way in which the decision is framed by the BoE. With a fresh set of projections not published until the August 4th meeting, this means the focus will rest on the meeting minutes and the voter split. Within the meeting minutes, markets will analyse the BoE’s latest assessment of growth conditions and the level of dissent against the Bank’s prior view that a “further tightening in monetary policy might still be appropriate”. Meanwhile, the voter split should give some guidance as to the sustainability of the Bank’s hiking cycle. We expect the MPC to vote 2-5-2 for a hold-25bps-50bps, signalling a dovish shift from May’s voting pattern. The impact of the Bank’s latest decision on currency markets may be limited, however, as implied rates in money markets have continued to disconnect from the Bank’s forward guidance since May’s decision.
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Simon Harvey, Head of FX Analysis