A Forex Guide to the Bank of England’s MPC Meeting
Forex traders know the importance of finding out all of the key dates of important financial news releases. Luckily, many websites display up-to-date economic calendars, so it’s simple for investors to find out about scheduled release dates of economic data.
Why is this so important? Before and during economic news releases, the markets are a lot more volatile than usual, with rapidly moving asset prices. The markets only settle once the release has been made public. Knowing when these announcements will occur enables you to plan a strategy in advance.
To make life easier for you, we’ve done all the leg work and gathered all the useful information on the BoE Monetary Policy Committee meeting, which is one of the biggest economic events. From understanding why it’s so important, to upcoming meeting dates, we’ve provided you with all the data you need to make an informed decision on your trading strategy.
What Is the BoE?
The BoE is an abbreviation for the Bank of England, the United Kingdom’s central bank. Although the Bank of England is owned by the British Government, they set monetary policy independently of the nation’s government. Their remit includes the management of the Pound Sterling, issuing banknotes within Wales and England, and monitoring the issuance of banknotes in Northern Ireland and Scotland.
They are also responsible for maintaining monetary stability in the country by delivering stable pricing and increasing confidence in the UK currency. The Bank of England’s MPC or Monetary Policy Committee does this by setting UK interest rates.
Another responsibility is maintaining financial stability within the UK by ensuring the smooth running of banking systems and making sure that people can trust the UK’s financial institutions.
What Is the Role of the Monetary Policy Committee?
The Monetary Policy Committee is tasked with formulating the UK monetary policy. Generally, they do this by setting the rate at which the BoE will lend money to banks. This interest rate is known as the Bank of England Base Rate or BOEBR for short.
By law, the MPC makes decisions with the goal of achieving price stability, which means meeting the 2% inflation target of the government. The Committee’s secondary goal is to support government economic policies, but also to help in achieving growth and employment targets. The Monetary Policy Committee is briefed on fiscal policy developments, but they are not responsible for it. This task falls to the Treasury.
According to the Bank of England Act 1998, if inflation misses the target by more than one percent, the Governor of the BoE must submit an open letter to the Chancellor of the Exchequer with explanations. It must also include the Bank’s plans on resolving the situation. He must send a letter every three months until the figures are back on target.
Why Is the MPC Meeting So Important for Traders?
The Bank of England MPC meeting dates are some of the most important in the economic calendar. The decisions taken at these events will have a major impact on the UK’s monetary policies and interest rates. In turn, this will affect the value of the Pound Sterling, which will carry over to many other currency pairs.
Interested investors speculate on the outcome of the MPC meeting, which leads to a lot of volatility in the forex trading market until the final decision is published. Thus, it’s important for forex traders to know the upcoming dates of the MPC meetings.
The MPC’s position on monetary policy is also essential. The two terms used to describe it are hawkish and dovish. Don’t worry if these terms are confusing because we’ll explain exactly what they are and how each will affect the currency value and your trading.
What Does a Hawkish Outlook on Monetary Policy Mean?
A hawkish outlook on monetary policy means that the Bank of England wants to protect the country from excessive inflation. In other words, they want to make sure that the overall price of services and goods doesn’t grow too much.
Inflation tends to happen during periods of economic growth, which leads to a rise in wages and, potentially, in the price of raw materials. If prices rise too quickly on services and goods, people won’t be able – or won’t want – to buy them, which leads to economic slowdown.
While economic growth is vital, the BoE doesn’t want it to happen too fast because it becomes unsustainable. Thus, they try to temper economic growth rate with a hawkish outlook, which basically means that they’re keeping a close eye on inflation. If they see inflation exceeds the target, they will raise interest rates.
A higher interest rate makes borrowing more expensive. The economy slows down because it’s more difficult for businesses to grow with borrowed money, and people won’t spend as much because loans and credit cards will cost them more.
The Effects of a Hawkish Outlook on Forex Trading
Rising interest rates will usually lead to currency values rising. Of course, this isn’t always the case, because many other factors play a role, but it’s important to be aware of what’s happening. The main reason currency values rise on higher interest rates is because people want to take advantage of the higher rate. So, they buy up the currency, driving up the value.
In other words, if the MPC meeting results in a hawkish outlook, it’s likely that interest rates will rise. This means the British pound will rise in value, which would mean you should consider a long position.
What Does a Dovish Outlook on Monetary Policy Mean?
When the MPC meeting closes with a dovish outlook, they are looking to protect the nation against deflation because the economy isn’t growing.
Deflation means that the price of goods and services is dropping. So, the BoE’s goal is to stimulate the economy by lowering interest rates to encourage people to buy more services and goods.
When borrowing money is cheaper and easier, businesses will grow faster, and people will spend more money using credit cards and loans. This injects more money into the economy and usually leads to economic growth.
The Effects of a Dovish Outlook on Forex Trading
Since a dovish outlook generally means lower interest rates, this could lead to the British pound’s value weakening. How much value it loses will depend on the interest rate the BoE is practicing compared to other countries.
So, if the interest rate in the UK is still higher than the interest rate in the US, for example, the British pound won’t lose as much value against the US dollar. This is because the rate is still attractive, and people will prefer the GBP over the USD.
However, it’s good to keep in mind that a dovish outlook can lead to the currency weakening so you can be prepared and adjust your forex trading strategies accordingly.
Who Are the Members of the Monetary Policy Committee?
The members of the Bank of England’s Monetary Policy Committee (MPC) meet regularly to discuss the country’s economic outlook.
The Monetary Policy Committee has 9 members. Of these, 5 are members of the Bank’s staff and include the Governor himself as well as 3 Deputy Governors and the Bank’s Chief Economist. Four of the other members are independent experts selected from outside the Bank specifically for their skills and experience within the field of monetary policy and economics.
The current members of the Monetary Policy Committee are:
Mark Carney – Governor (appointment term from 1 July 2013 to 30 June 2021)
– Ben Broadbent – Deputy Governor, Monetary Policy (appointment term 1 July 2014 to 30 June 2019)
– Sir David Ramsden – Deputy Governor, Markets & Banking (appointment term 1 September 2017 to 31 August 2022)
– Sir Jon Cunliffe – Deputy Governor, Financial Stability (appointment term 1 November 2013 to 31 October 2023)
– Andrew Haldane – Chief Economist and Executive Director, Monetary Analysis & Statistics (appointment term 1 June 2014 to 11 June 2020)
– Jonathan Haskel – External Member (appointment term 1 September 2018 to 31 August 2021)
– Michael Saunders – External Member (appointment term 9 August 2016 to 9 August 2019)
– Dr Gertjan Vlieghe – External Member (appointment term 1 September 2015 to 31 August 2021)
– Silvana Tenreyro – External Member (appointment term 1 July 2017 to 30 June 2020)
How Often Is There a BoE Monetary Policy Committee Meeting?
The Bank of England used to hold MPC meetings every month to set interest rates. However, after the 15 September 2016 MPC meeting, they changed to a schedule of 8 meetings per annum, following the recommendations made by the Warsh Review.
Before every Monetary Policy Committee meeting, the committee is extensively briefed on the state of the country’s economy, which has been compiled by the staff of the Bank of England.
A half-day meeting is held a week before the MPC meeting itself is scheduled to go through the briefing. The Bank of England MPC meeting takes place over 3 days, with the first of the three meetings normally being held on a Thursday, before the final decision is taken. During this meeting, members of the committee discuss their opinions and interpretations about the recently released economic data.
In the second meeting, which is generally held on the following Monday, the committee members debate the direction in which they believe policy should go. In the third and final meeting, which is generally on the Wednesday, the committee holds final discussions followed by a vote on the level of interest rate.
The final decision is published at noon on Thursday, along with the full minutes of the meetings.
When Is the BoE Holding MPC Meetings in 2019?
Serious investors need to know the dates on which the Monetary Policy Committee meetings are taking place. Here is a schedule of the upcoming MPC meetings in 2019.
MPC Meetings in 2019
- February 7th
- March 21st
- May 2nd
- June 20th
- August 1st
- September 19th
- November 7th
- December 19th
Discover the Best Options for Trading The BoE Meeting
A significant number of Forex traders prefer not to trade around the BoE meeting date to minimize their risk of financial loss. However, others enjoy the volatility in the forex market and prefer to risk entering into a position that they hope will bring them a profit.
Reversals in price are very common in the climate around a major economic news release such as the BoE MPC meeting. This makes trading the reversal even more dangerous than normal. While it is possible to profit in this type of environment, strong risk and money management skills and techniques are vital.
If you want to try this strategy, you must first identify the levels of support and resistance before the release of the announcement. Wait until the data is released and, in the immediate aftermath, watch the prices to see if these levels come into action and if they hold.
You want to wait for the price to hit a long-term support level before you open a long position. Then place a stop just below the support line. Make sure the stop loss is tight so you can close out the position as quickly as possible if the reversal doesn’t play out.
However, if the level of support continues to hold, you can then start to scale out once the price moves in your favor to capture as much of the upside as you can.
Take Action and Choose a Forex Broker
Now that you understand the importance of the BoE’s MPC meeting and how it can affect currency values, you’re ready to get started. It’s time to choose one of the great brokers we work with and open an account. Take advantage of your knowledge on the MPC meeting and make a nice profit.