FX

Next week, the Bank of England will have its monetary policy meeting. Analysts at Wells Fargo, believe the central bank will signal another slowdown in asset purchases over the next few month. They see the next tapering taking place by the end of the summer.

Key Quotes: 

“Over the past few months, the Bank of England (BoE) has slowed asset purchases and hinted at additional tapering going forward. The pace of the U.K. recovery has been impressive as monthly GDP data have reflected a sharp recovery in economic activity following the gradual lifting of restrictions. This week, the U.K. economy demonstrated just how strong the recovery is as CPI inflation topped 2% for the first time in since 2019. However, COVID cases have risen as the delta variant has spread across the country at a rapid pace. In response, Boris Johnson delayed the full reopening of the economy by one month.”

“At the BoE’s meeting next week, we expect policymakers to provide an update on how the economy is evolving and if the renewed spread of COVID is disrupting economic activity. In addition, we expect BoE officials to provide an updated view on inflation and whether price growth is transitory or more engrained. But given the pace of the recovery, we do believe the BoE will signal a further slowdown in asset purchases is likely over the next few months. In our view, the next taper will likely occur toward the end of the summer at the BoE meeting in August.”

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