Here's what to expect from the Bank of England on Thursday

Pound jumps as BoE hints at rate rise in May

The Pound briefly touched its strongest position since the beginning of February on Thursday after the Bank of England left interest rates unchanged, but signalled it is ready to hike rates again at its next monetary policy meeting.

"The rate rise made in November felt like a straightforward reversal of the emergency post-Brexit cut, but this now feels more like we're entering a genuine tightening phase at the Bank".

The transition deal, which is expected to be confirmed Thursday at a meeting of European Union leaders, has, according to many economists, made it even more likely that rates will be raised in May, alongside the next set of quarterly economic projections from the Bank.

Two members of the Bank of England rate setting committee - Ian McCafferty and Michael Saunders - voted to put interest rates up this month.

The bank increased its base interest rate from 0.25% to 0.5% in November last year, having previously failed to raise rates in more than a decade as a response to the financial crisis. "The firming of shorter-term measures of wage growth in recent quarters and a range of survey indicators suggest pay growth will rise further in response to the tightening labour market", the MPC said. UK GDP growth in the fourth quarter was revised down slightly, to 0.4%, with the composition of demand implying less rotation towards net trade and business investment than anticipated at the time of the February Report. The unemployment rate remained low in the three months to January.

Trade Wars: USA Vs China
That measure had not targeted Chinese imports alone. "And they'll be paying more because the US economy won't be growing as much". Last year, American farmers exported $1.1 billion of pork products to China and Hong Kong, making it the No. 3 market by value.

Data showing a further recovery in pay growth was also seen as a sign that the BoE was on course to raise rates when it next revises its economic outlook in May.

Comments from Vlieghe and talk on transition follow Thursday's Bank of England monetary policy decision, which was seen as providing confirmation that it will raise interest rates for a second time in May but lacking any meaningful signals of what might come after that. "Overall, last-minute information released before today's MPC meeting, such as the news that wage growth has "accelerated" to 2.6%, strengthens the case for a rate rise in May", Urwin said.

"Given the fact that economic data has not been altogether positive in the past month, this will likely underline the Committee's resolve to begin the slow process of normalising monetary policy in the face of still stubbornly high inflation, but very tepid growth", Metcalfe said. But while that pound-driven increase in prices is expected to ebb, the Bank of England believes the pick-up in wages will continue to support inflation.

Burton Mills' economists say that data indicating a recovery in salary growth is another indication that the BoE will likely increase interest rates in May.

Carney is not due to give a news conference after Thursday's rate decision announcement and the publication of its monetary policy statement and meeting minutes at 1200 GMT.



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