What is the BOE? The Bank of England, BOE, is the central bank of the United Kingdom (UK) that oversees monetary policy, acts as the government’s bank, and bears responsibility as the lender of last resort.

What Are the BOE’s Goals?

Their main goal is to promote the good of the people of the UK by maintaining monetary and financial stability.

The BOE is responsible for making sure that prices within the UK are stable and that their currency, the Great British Pound (GBP), retains the highest level of confidence among the public.

The BOE is also responsible for protecting and enhancing the stability of the UK’s financial system by managing the systematic risks involving financial institutions, markets, and market infrastructures.

How Do They Achieve Their Goals?

The responsibilities of the BOE is shared between three main bodies: The Monetary Policy Committee (MPC), the Financial Policy Committee (FPC), and the Prudential Regulation Committee (PRC).

The MPC is tasked with establishing the monetary policy of the UK, which affects how much money is circulating in the economy. The MPC uses two main tools to implement their policies: The Bank Rate, which is the interest rate that the BOE charges banks to borrow money from the central bank; and Quantitative Easing (QE), which is the process of printing more money and injecting it into the economy.

The FPC is in charge of establishing a rigorous baseline level of resilience to protect the UK real economy, ensuring its resilience against possible systematic shocks, and enabling the system to absorb such shocks, if/when they occur, so it can continue to support the economy.

The PRC regulates and supervises around 1,500 banks, building societies, credit unions, insurers, and major investment firms to make sure they operate with adequate risk controls and sufficient capital in place.

Dovish VS Hawkish




The MPC members are distributed on a scale from Dovish to Hawkish. The dovish tend to be pessimistic and view the economy in need of stimulation; therefore, they tend to decrease bank rates and, thus, increase money supply.
However, the hawkish are on the other extreme end with an optimistic view of the economy; therefore, they tend to increase bank rates and, thus, decrease money supply and control inflation.
The remaining policy members include a minority titled the “Centralists”. They usually look at the market and tend to be data-driven, focusing on what actually is happening in the market.
Mark Carney, chairperson of the MPC and Governor of the BOE, is considered to be a Centralist; however, he leans closer towards hawkishness rather than dovishness.




What Are the Possible Scenarios of MPC Announcements?


The decision of the meeting can be summarized into three main moves: A Hike, A Hold, or A Cut.
A rate hike is a lever that the central bank will use to reduce the demand for borrowing by making it more expensive. This has a contractionary effect and is used to help slow down a buoyant, and potentially over-heated, market and keep within the BOE’s mandates.

A rate cut, on the other hand, is an action that the central bank will take to make borrowing and, subsequently, spending more attractive. A rate cut is generally used to stimulate an economy that may have economic and inflationary troubles, which tends to weaken the local currency.

If rates remain unchanged, the focus for traders turns to the “tone” of the MPC statement, whether the tone was hawkish or dovish over future developments of bank rates and the main objectives of the MPC.

How to Trade the MPC?

Conditions

Results

GBP Strengthens Slightly

Slight Decrease

Slight Decrease

Please note that the above directional suggestions do not take into account the current Geopolitical or Market positioning pressures that could easily cause the opposite to occur. With this in mind, it is always beneficial to keep yourself abreast of the current market conditions when planning your trades.

The Bank of England Interest Rate

The Bank of England left its benchmark interest rate unchanged at 0.75% on December 20th, 2018, as widely expected. It remained the highest rate since March 2009.

2019 MPC Meeting Dates

The MPC usually meet 8 times a year, each of which they announce their bank rate decision and release the minutes at the conclusion of the meeting. Below is a table of the upcoming meetings and the market’s reaction to the decision of the previous meetings. The dates of the meetings are as found in Forex Calendar.

Thursday,
November
1,2018

Thursday,
December
20,2018

Thursday,
February
7,2019

Thursday,
March
21,2019

Thursday,
May
2,2019

Thursday,
June
20,2019

Thursday,
August
1,2019

Thursday,
September
19,2019

Thursday,
November
7,2019

Thursday,
December
19,2019