The Bank of England (BoE) is set to announce its decision on interest rates on Thursday, and economists at Commerzbank have warned that if the central bank decides to pause its rate hike cycle, Sterling may suffer.
Commerzbank economists believe that the BoE’s decision will be crucial in determining the future of the Pound, as a pause in the rate hike cycle could lead to a notable decline in the currency’s value.
BoE likely to be viewed as more hesitant than the ECB
Commerzbank economists also suggest that regardless of the BoE’s decision, the bank is likely to be viewed as the more hesitant central bank when compared to the European Central Bank (ECB). This could further impact the medium-term outlook for Sterling.
The ECB has already signaled that it will begin tapering its bond-buying program, which is seen as a more hawkish move than the BoE’s recent decision to raise interest rates. The BoE has faced criticism for being too cautious in its approach to raising rates, which has led to speculation that it may not follow through with further rate hikes in the near future.
Impact of the BoE’s decision on the UK economy
The BoE’s decision on interest rates will not only affect the value of the Pound, but also have broader implications for the UK economy. A pause in the rate hike cycle could signal a lack of confidence in the UK’s economic recovery, and may lead to a decrease in business and consumer confidence.
On the other hand, if the BoE continues to raise rates, it could help to curb inflation and support the Pound. However, this could also lead to increased borrowing costs for businesses and consumers, which may have negative effects on economic growth.
The BoE’s decision is also likely to impact the country’s housing market, as higher interest rates could make it more difficult for people to afford mortgages. This, in turn, could lead to a slowdown in the housing market, which has been a key driver of the UK’s economic growth in recent years.
Overall, the BoE’s decision on interest rates will have significant implications for the UK economy, and investors will be closely watching the announcement on Thursday to see how the central bank plans to navigate these challenges.