Bank of England Set to Defy Fed Hike
Bank of England Set to Defy Fed Hike
The News
The Bank of England is expected to leave interest rates unchanged on Thursday despite rising inflation, breaking with the U.S. Federal Reserve, which raised borrowing costs a day earlier.
It would be the sixth consecutive time the Bank's Monetary Policy Committee has chosen to freeze rates, according to The Independent.
U.K. inflation has risen to 3.1%, and energy costs are keeping pressure on prices, CNBC reported.
The Numbers
U.K. inflation: 3.1%. Expected Bank of England decision: no change. Consecutive freezes if it holds: six.
Timeline
The U.S. Federal Reserve raises borrowing costs, according to Reuters. The same day, minutes reported by Reuters show the Bank of Canada expected inflation to stay high in the near term, and CTV News reported that fears of a reigniting trade dispute with the United States loomed over the Canadian central bank's rate decision earlier this month.
The International Monetary Fund says Australia's central bank may need to raise interest rates further, with inflation expected to remain elevated this year before gradually cooling into the bank's target band, Reuters reported.
The Bank of England is expected to announce that it is holding rates steady, with investors watching for any hint that surging energy prices could force it to follow the Fed, per Reuters.
Reactions
Investors are watching the Bank of England's language rather than its number, Reuters reported, looking for any signal that the energy shock could push the Monetary Policy Committee toward a hike.
The IMF's view on Australia points the other way: the fund said Thursday that further rate rises may be needed there to tame inflation, Reuters reported.
In Canada, policymakers were preoccupied with Washington. CTV News reported that Bank of Canada officials worried a fresh U.S. tariff dispute would weigh on business and consumer confidence.
The Independent framed the U.K. hold as a decision taken while inflation fuels cost-of-living fears.
What's Next
The Bank of England's decision is due Thursday, and the accompanying statement — not the rate itself — is what markets expect to move on.
If energy prices keep climbing, Reuters reported, talk of a U.K. hike will grow, which would put the Bank on the Fed's path after months of standing still.
Australia's central bank faces the IMF's warning that more increases may be required before inflation settles back into its target band.
More
The split is the story. The Fed has moved, the IMF is urging Australia to consider moving, the Bank of Canada sees inflation staying high in the near term, and the Bank of England is expected to sit still for a sixth straight meeting.
For Americans, the read-through is that the Fed is now out front on tightening while major peers hold — and that a U.S. tariff fight is already showing up in another central bank's confidence worries.
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