The focus of today’s European session was the Bank of England (BOE) policy meeting which is expected to continue to maintain substantial support for the British economy, despite a major recovery in the economy and a high inflation spike.
This follows a statement from Governor Andrew Bailey that still seeing the recent rise in inflation is only temporary.
The UK inflation rate had soared to 2.5% in June, and the BOE said in its latest forecast that it would rise even further than the central bank’s 2% target.
However, analysts do not rule out the possibility that the central bank may begin to draw up plans on how to withdraw its stimulus.
With more than 70% of adults in the UK being fully vaccinated and most sanctions measures being lifted, the UK economy has overcome 10% of the recession experienced by 2020 and is expected to grow faster among the world’s developed nations.
While there is still uncertainty from the increase in Covid-19 cases around the world, BOE policymakers may have at least mentioned a reduction in their bond purchases.
Tonight, markets expect the BOE to release the latest forecasts on their growth and inflation, and the central bank is likely to issue a more optimistic statement on the economy and the current Covid-19 situation.
Analysts also expect that at least one or two policymakers will opt for tightening in July. If there are more than two people, the pound is expected to show a positive reaction tonight.
