September 23, 2021

Will the BOE Follow in the Fed's Footsteps?

 The Bank of England (BOE) became the next market focus after the US Federal Reserve (Fed) signaled a reduction in bond purchases would begin soon.

Despite being shown by rising inflation data but investors expect the central bank to remain with interest rates at 0.10% and a bond -buying program of £ 895 billion.

The UK is currently experiencing the same macroeconomic problems as most major economies, where it has to deal with rising inflation and slowing economic growth.

The inflation rate had risen 3.2% in August, much higher than the central bank’s target of 2%. The increase is not far from last month’s BOE forecast which is expected to rise 4% this year.

The employment sector has begun to recover, albeit at an uneven rate. The UK government's employment subsidy program will end at the end of this month, which could have an impact on future employment reports.

So, this may be a factor for the central bank to remain with the current loose monetary policy.

For now, investors will likely see if there are more members of the Monetary Policy Committee (MPC) ready to halt the bond -buying program by the end of the year, as planned at the November 2020 meeting.

Even so, some are expecting the BOE to be more hawkish at the meeting this time around.

Governor Andrew Bailey had previously said that during an August policy meeting, some policymakers saw that the UK economy was healthy enough to raise interest rates, while others argued otherwise.