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It's all to play for; the Bank of England's April 30 decision won't deliver a cut or a hike, but as always, the interest will be found in the guidance
What does the Bank think it will do in the coming months?
The answer will likely drive the pound: any signal that it stands ready to raise rates will underpin the expectation that the Bank will raise rates twice this year. This represents a supportive outcome for the pound.
Any hint that it will stay on hold will see that pricing come down. This would weigh on the pound.
The initial, and perhaps the most important signal, drops at midday when we see how the Monetary Policy Committee voted: the split is in itself an important hint on which way the Committee is leaning, as it shows where the momentum in thinking is shifting.
"We look for a 7-2 vote split, with two members dissenting in favour of a hike. That would lay the groundwork for a hike as soon as June," says Henry Cook, economist at MUFG Bank Ltd in London.
Cook says a June hike will be increasingly likely if subsequent labour market data shows wage pressures are rising again, as accelerating wage price increases would be a classic sign of second-round inflation effects in the economy.
MUFG forecasts the Bank of England to engage in modest tightening this year as it looks to get ahead of rising second-round inflation risks.
The Bank knows there is nothing it can do about the situation in the Middle East, but it must be cautious of inflation becoming embedded. March's CPI inflation print of 3.2% showed a large increase in fuel prices. But it also revealed stubborn service inflation, which could get worse as firms and households look to get ahead of another bout of inflation.
John Davies, a rates strategist at Standard Chartered, says two votes for a hike, and especially three or four, would likely push the market even closer towards fully pricing in a June increase.
Overall implied tightening could rise from the current 65bp closer to 75bp (that's three hikes for the current cycle).
However, "a unanimous on-hold vote to be viewed as leaning dovish by the market, which – assuming conflict-related news is not sending oil prices higher at the same time – would likely reduce some of the rate hike pricing implied for the next 2-3 meetings."
That would weigh on pound exchange rates.
Andrew Wishart, Senior UK Economist at Berenberg Bank explains that the UK sees very different economic conditions to those that prevailed in 2022, suggesting that rate hikes are unnecessary, and that the Bank will eventually be able to resume cuts.
"Near-term inflation will further erode household income, already squeezed by decelerating pay growth, a stagnant jobs market and a rising personal tax burden. Meanwhile, an increase in businesses' costs that they cannot pass on could undermine the recent stabilisation of the jobs market," he adds.
