The U.S. Federal ReserveFederal Reserve isn't the only central bank with a tough decision to make.
Traders and analysts aren't certain what the Bank of England will do at Thursday's meeting, despite red-hot inflation.
Analysts at Barclays believe that the Bank of England will keep interest rates at 4% rather than lift them.
We think significant upside risks to inflation would have called for a final 25 basis point hike, largely due to risk-management considerations. The call presupposed that the transmission of monetary policy tightening across major jurisdictions remained orderly, which is no longer the case, with increasing risks of a tighter financial situation via the banking channel, they said. The last hurrah is seen by economists at Nomura with a quarter point hike. The labor market is strong, with a near 100,000 increase in payrolls in February, and core inflation is still at 5.8% year-over-year. Since the financial crisis of 2008, the rates at 4.25% would be the highest, but not particularly high relative to other cycles. The Bank of England is looking over its shoulder at what the Federal ReserveFederal Reserve does on Wednesday, according to analysts at Evercore. If the Fed goes ahead and follows the European Central Bank in delivering a cautious hike, Gov. Andrew Bailey and Co may worry that a BoE pause could signal greater concern about UK banks, they say. They say that the BoE will be affected if the Fed pauses. It is interesting logic, especially as the Bank of England makes its decision on Wednesday, even though it is announced on Thursday. The Bank of England publishes minutes with the decision, unlike the Fed. They urge investors to be humble at the Bank of America. They add that they expect a further dovish shift to guidance and no further hikes after this week. The pound GBPUSD was trading around $1.22 on Tuesday. The yield on the 2 year gilt TMBMKGB 02 Y was 3.28%, having been above 4% as recently as three weeks ago.