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It's all to play for; the Bank of England's April 30 decision won't deliver a cut or a hike, but as always, the interest will be found in the guidance
What does the Bank think it will do to interest rates in the coming months?
The answer will likely drive the pound: any signal that it stands ready to raise rates will underpin the expectation that the Bank will raise rates twice this year. That should be enough to support recent gains made by the pound against the euro.
Any hint that it will stay on hold will meanwhile be interpreted as a more subtle pushback against the recent build-up in interest rate expectations, which would see that pricing come down. Such a scenario would weigh on the pound.
The initial, and perhaps the most important signal, drops at midday when we see how the Monetary Policy Committee voted: the split is in itself an important hint on which way the Committee is leaning, as it shows where the momentum in thinking is shifting.
"We look for a 7-2 vote split, with two members dissenting in favour of a hike. That would lay the groundwork for a hike as soon as June," says Henry Cook, economist at MUFG Bank Ltd in London.
Cook says a June hike will be increasingly likely if subsequent labour market data shows wage pressures are rising again, as accelerating wage price increases would be a classic sign of second-round inflation effects in the economy.
MUFG forecasts the Bank of England to engage in modest tightening this year as it looks to get ahead of rising second-round inflation risks.
Strategists at TD Securities say there's a 35% chance the Bank delivers a 'hawkish' outcome that results in a 0.3% advance in the pound.
Here, the Bank would point to a recent run of strong economic and sentiment data, and the balance of risks shifts to rising inflationary pressures.
"Potential of second-round effects gains more prominence in the statement," says TD Securities.
The Bank knows there is nothing it can do about the situation in the Middle East, but it must be worried that the conflict sparks a new round of inflation embedding beyond energy prices. March's CPI inflation print of 3.2% showed a large increase in fuel prices. But it also revealed stubborn service inflation, which could get worse as firms and households look to get ahead of another bout of inflation.
John Davies, a rates strategist at Standard Chartered, says two votes for a hike, and especially three or four, would likely push the market even closer towards fully pricing in a June increase.
He says overall implied tightening could rise from the current 65bp closer to 75bp (that's three hikes for a new cycle of increases).
However, he counters that "a unanimous on-hold vote to be viewed as leaning dovish by the market, which – assuming conflict-related news is not sending oil prices higher at the same time – would likely reduce some of the rate hike pricing implied for the next 2-3 meetings."
That would weigh on pound exchange rates.
Andrew Wishart, Senior UK Economist at Berenberg Bank, explains that the UK sees very different economic conditions to those that prevailed in 2022, suggesting that rate hikes are unnecessary, and that the Bank will eventually be able to resume cuts.
"Near-term inflation will further erode household income, already squeezed by decelerating pay growth, a stagnant jobs market and a rising personal tax burden. Meanwhile, an increase in businesses' costs that they cannot pass on could undermine the recent stabilisation of the jobs market," he adds.
Economists gathered by the IEA think tank to form a shadow monetary policy committee say there's no need to do anything other than hold interest rates given the UK's standard M4ex broad money measure has been fairly stable since the start of 2025, and that's consistent with a stabilisation in inflation.
It says recent energy price shocks, which have not yet been close to the scale of past energy market shocks, should be regarded principally as a supply-side shock about which monetary policy can do relatively little, and pass-through into overall price inflation could be less than in the past.
"A reasonable objective is to keep a stable money growth, and we have a pleasantly stable monetary growth. So, there is no reason to change bank rate." says Andrew Lilico, Chair of the Shadow Monetary Policy Committee and IEA Economics Fellow.