The expectation coming into today's decision is that the BOE will be raising the bank rate by 50 bps to 1.75%. OIS pricing suggests that this is roughly ~92% priced in, so pretty much there isn't much to work with on such a decision.
The next key thing to watch will be the votes but upon a cursory glance at that, the language put out by the BOE today will be the main thing to scrutinise. Will we see something along the lines of the RBA which suggested that future decisions will "not be on a pre-set path"? Or will the BOE kick the can down the road again and be more subtle about any potential pivot?
A rate hike today will mark a sixth consecutive increase to the bank rate. Yet, it still somehow feels rather underwhelming. Inflation continues to run rampant in the UK with double-digits set to feature in the months ahead. And the economy is grinding towards a slowdown with the cost-of-living crisis set to intensify further in Q3 and Q4 this year.
The window to tighten more aggressively is slowly closing for the BOE and if we are to get more poor data out of the UK, it will only hasten the likelihood of a shift in stance by the central bank. Inflation is the number one concern still for now but against the backdrop of a recession, policymakers cannot ignore that completely if they want to avoid a 'hard landing'.
I would expect the BOE to exert some caution about the outlook today and that might be enough for the pessimists to work with and drag the pound lower. All things considered, risks are skewed to the downside and unless the BOE can get away with keeping the status quo, the quid may not get much help in terms of getting a lift from today's decision.
Besides the focus on the language surrounding the outlook, the forward guidance will also be one to watch in case there are any changes. Here is the one for June:
"The MPC will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit. The scale, pace and timing of any further increases in Bank Rate will reflect the Committee’s assessment of the economic outlook and inflationary pressures. The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response."