Estimating market expectations of changes in Bank Rate

Quarterly Bulletin 2015 Q3
Published on 18 September 2015

By David Elliott of the Bank’s Sterling Markets Division and Joseph Noss of the Bank’s Capital Markets Division.

The Bank uses a variety of methods to extract information about market participants’ expectations of the future path of Bank Rate. This article examines some techniques for estimating, using market prices, market expectations of the timing of future changes in Bank Rate and the probability of Bank Rate being changed within a given period of time. These techniques are useful because the expected timing of changes in Bank Rate cannot be directly inferred from the mean expected path of the level of Bank Rate.

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