Bank of England Set to Hold Rates Despite UK Growth Beat

The Bank of England is widely expected to leave its benchmark interest rate unchanged at its policy meeting this week, even after fresh data showed the UK economy expanding faster than forecast, according to market previews from ForexLive and BabyPips.

Official figures showed UK gross domestic product rose 0.4% month-on-month in July, well above the 0.0% growth economists had penciled in and an improvement on June's revised 0.3% expansion. On an annual basis, output grew 1.6%, versus a forecast of 1.0% and up from a prior reading of 1.1%, according to ForexLive's coverage of the release.

Ahead of the release, ForexLive's daily calendar preview flagged that the GDP print was unlikely to shift the Bank of England's near-term approach regardless of the outcome, noting that a majority of the Monetary Policy Committee already appeared aligned on holding rates steady at the coming meeting.

That view was echoed in BabyPips's fundamentals outlook for the week of September 14-18, which grouped the BoE's decision alongside two other major central bank meetings occurring within roughly 72 hours of one another. The preview specifically flagged a hold as the expected outcome for the BoE, in contrast to the Federal Reserve, where a rate hike was seen as roughly 85% priced by markets, and the Bank of Japan, which was also expected to raise its policy rate around the same time.

The grouping highlights a growing divergence in the near-term paths of major central banks, with the Fed and the BOJ leaning toward tightening while the BoE appears set to hold its position even as UK growth data outperformed expectations. That divergence adds weight to any accompanying commentary from Bank of England officials about the policy outlook once the current run of major central bank decisions has cleared.

The stronger growth figures offered some support to sterling on the day, though the currency's reaction was tempered by a broadly firmer dollar as traders raised bets for the Fed's own rate move. With the Bank of England's decision due this week, market participants are treating an unchanged rate as the base case, leaving the Monetary Policy Committee's guidance and vote split as the more closely watched signal for the pound's medium-term path.