James Lynch, Fixed Income investment manager at Aegon Asset Management comments:
“On super Thursday we are expecting the BoE to give a more upbeat assessment of the economic outlook for the UK. The vaccine rollout is going very well, we had a March Budget 3% fiscal boost, GDP has been surprising to the upside this year and consumer confidence is high as are household balance sheets. In fact they may be doing a little too well given the activity going on in the housing market.
“We do not expect any change in policy rate in May, or for the rest of the year. But we think there is a good chance of the ‘taper’, adjusting the amount of Gilts the Bank buys on a weekly basis down from its current level of £4.4bn, somewhere in the £3.5bn range is likely. This is more mechanical to get the programme to last longer and smooth out the purchases, rather than wait longer and have to reduce by a larger amount as the £150bn is a fixed amount they intend to buy.
“When the BoE plug in the numbers to their models we expect an uplift in GDP for this year and what we are watching very carefully is their medium term inflation forecast, this could move markets more than the taper talk, as it can give a good signal as to how quickly interest rates will need to rise.”