The Bank of England (BoE) is widely expected to hold the benchmark Bank Rate unchanged at 3.75% for a third consecutive meeting on Thursday, as traders assess the impact of the Middle East war on prices and the UK economy.
The Persian Gulf conflict-led elevated Oil prices have raised inflation concerns and kept expectations of a BoE rate hike this year on the table.
Against this backdrop, the Monetary Policy Committee (MPC) policymakers are seen voting 8-1 to leave rates unchanged at the April monetary policy meeting, following a unanimous hold in March.
It’s a “Super Thursday” – the Monetary Policy Report (MPR) will be published alongside the policy statement and the Minutes of the meeting at 11:00 GMT, followed by a press conference from Governor Andrew Bailey at 11:30 GMT.
The volatility around the Pound Sterling (GBP) is expected to ramp up on the United Kingdom (UK) central bank’s policy events.
Bank of England to stick to wait-and-see guidance
With the US-Iran conflict entering its third month and no signs of a breakthrough concerning the Strait of Hormuz, investors are waiting to see whether the BoE offers any hints on a potential interest rate hike later this year as the war impact continues to feed into inflation.
Data from the Office for National Statistics (ONS) show that the UK inflation, as measured by the change in the Consumer Price Index (CPI), rose to 3.3% year-over-year (YoY) in March from 3.0% in February, showing the first hit from the Iran war.
Services inflation was up, though only because of volatile air fares due to the Easter holidays.
However, the key question is whether the leap in energy prices would ignite broader inflation or a weak jobs market would keep a lid on demand for higher pay and price increases by companies.
The latest labor market data showed that British wage growth slowed further, as Average Earnings, excluding Bonus, came in at 3.6% YoY in the three months ending February, down from 3.8% in the three months to January.
That being said, the BoE’s updated inflation and growth projections in the MPR will be closely scrutinized for fresh guidance on the rate outlook, especially after the central bank said in March that it “stands ready to act” to combat inflation stemming from the war.
Meanwhile, Ofgem, the UK’s energy regulator, cut its price cap by 7% in April, reducing typical annual household energy bills, although that could be offset by the war impact and tax rises as the new tax year begins.
Therefore, the BoE will likely stick to its wait-and-see stance, reiterating that it remains ready to act on inflation, trying to balance market expectations around prospects of higher inflation and a rate hike later this year.
Analysts at BBH noted, “the swaps curve is pricing nearly 75bps of rate hikes over the next twelve months to 4.50%. BoE rate hike bets are too rich in our view given excess slack in the economy.”
“In February, the BoE estimated a negative output gap of -1% of GDP in 2026. The MPR will include an update of that estimate,” the analysts added.
How will the BoE interest rate decision impact GBP/USD?
The GBP remains below the 1.3600 barrier against the US Dollar (USD) in the lead-up to the BoE’s showdown.
If the BoE’s statement and Governor Bailey stick to the cautious rhetoric while the MPC vote split aligns with the market expectations or surprises with a unanimous hold, the Pound Sterling could see a fresh breakdown, driving GBP/USD toward the 1.3400 level.
Conversely, the GBP could extend the uptrend toward the 1.3700 round figure against the USD should the central bank express concerns over inflation, signalling a hawkish pivot. GBP/USD could also gain traction if the MPC vote split shows more than one dissenter on a no-rate-change decision.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for GBP/USD:
“The 21-day Simple Moving Average (SMA) at around 1.3444, the 50-day SMA near 1.3409, and the 200- and 100-day SMAs clustered between roughly 1.3414 and 1.3467 all sit below spot, suggesting a supportive underlying structure. The Relative Strength Index (RSI) around 56 on the daily chart stays in positive territory without yet signaling overbought conditions, hinting that upside momentum remains constructive while not overstretched.”
“On the downside, initial support is reinforced by the 100-day SMA at 1.3467, with the 21-day SMA at 1.3444 providing a nearby secondary floor. Below there, the 200-day SMA around 1.3414 and the 50-day SMA close to 1.3409 form a broader demand zone that would need to give way to undermine the current constructive tone. Conversely, buyers need to reclaim the 1.3600 mark to revive the uptrend. The next topside targets are seen at the 1.3700 round level and the February high of 1.3733, ” Dhwani adds.
Economic Indicator
BoE’s Governor Bailey speech
Andrew Bailey is the Bank of England‘s Governor. He took office on March 16th, 2020, at the end of Mark Carney’s term. Bailey was serving as the Chief Executive of the Financial Conduct Authority before being designated. This British central banker was also the Deputy Governor of the Bank of England from April 2013 to July 2016 and the Chief Cashier of the Bank of England from January 2004 until April 2011.
Next release:
Thu Apr 30, 2026 11:30
Frequency:
Irregular
Consensus:
–
Previous:
–
Source:
Bank of England
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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