Bank of England unlikely to adjust monetary policy in March – DNB Bank

The Bank of England is set to meet on Thursday. According a DNB Bank research report, the U.K. central bank is unlikely to adjust monetary policy. The macro picture has softened slightly since the earlier meeting in early February. The British economy expanded at an annualized 1.6 percent in the fourth quarter, down from 2 percent in the earlier. LFS-unemployment rose to 4.4 percent in November, after having been stable at 4.3 percent in five consecutive months. Business confidence has been mixed, with services and construction up in February, and manufacturing stable.

Consumer inflation has been stable at 3 percent year-on-year for two months, after having peaked at 3.1 percent year-on-year in November. Inflation is likely to have slowed down to 2.8 percent year-on-year in February. The consumer price inflation is expected to drop further during the course of 2018, as the impacts of GBP-weakening will level off, stated DNB Bank. Wage growth has edged up marginally to 2.5 percent but is still moderate and is not putting any upward pressure on prices.

The Bank of England stated in February that “were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would require to be tightened slightly earlier and by a slightly greater extent over the forecast period than anticipated at the time of the November Report”. This was interpreted as indicating towards a hike in May, said DNB Bank.

“As it seems that the development has been more or less in line with what BoE envisaged in February, we still think that it is likely with a hike in May”, added DNB Bank.

At 14:00 GMT the FxWirePro's Hourly Strength Index of British Pound was slightly bullish at 57.9258, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 3.24209. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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