The BOE will meet on Thursday in a volatile environment that could result in some market shake-ups. The UK economy is in recession and it makes it difficult for central banks to combat inflation. The target rate has been exceeded five times by the rise in consumer prices.
These extraordinary circumstances have created a growing discord within the BOE over how to respond to them. In the wake of the meeting, traders will be focusing on this split. The outcome of the vote count can help determine where the market expects policy to take place in the coming weeks.
Two roads split in a yellow wood
There are two possible paths for the BOE. So there is much focus on which one will be chosen. Since it received the most votes at the recent meetings, the most likely path is to continue tightening policy. However, it could make the current economic situation worse. This would mean a strengthening of the pound for traders at least in the short term. This could lead to the BOE increasing its rate of hike by 50bps, or more, at the upcoming meetings.
The minority view is in favor of the rescue of the economy in the short term. They argue that inflation is due to…