BoE Rate Decision Leaves Markets on Edge

ING's financial analysts expect the Bank of England (BoE) to keep interest rates unchanged this week, with a 7-2 vote remaining their base case. However, Catherine Mann may join Huw Pill and Megan Greene in supporting a rate hike.

Catherine Mann could potentially change the dynamics of the decision, but ING's Francesco Pesole still believes that rates will remain on hold for the rest of the year. According to him, contained inflation projections would strengthen this case, possibly forcing markets to unwind some of the 38bp of tightening priced by year-end.

This could lead to downside risks for Sterling, as ING expects a dovish repricing in the near term. The analysts also point out that higher energy prices remain an upside risk to inflation, but they expect the updated projections to show CPI peaking comfortably below 4%.