Lloyds share price hangs tight ahead of BoE 12th rate hike

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on May 10, 2023
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  • Lloyds Bank stock has been in a consolidation phase in the past few days.
  • The Bank of England will deliver its interest rate decision on Thursday.
  • Analysts expect the bank will hike interest rates for the 12th straight meeting.

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The Lloyds (LON: LLOY) share price pulled back to a low of 46.15p ahead of the upcoming interest rate decision by the Bank of England (BoE). Shares of the biggest British bank have dropped by more than 12% from the highest point this year. Other British banks like Barclays, HSBC, and Standard Chartered have also retreated.

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Bank of England’s decision

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The biggest news in finance this week will be the upcoming interest rate decision by the Bank of England, which is scheduled for Thursday. Economists believe that the bank will hike interest rates by 0.25% to 4.50%. This will be in line with what other central banks like the Federal Reserve and the European Central Bank (ECB) did last week.

The British economy is sending mixed signals as it holds better than previously estimated. Inflation remained above 10%, signaling that the economy has moved into a stagflation period. 

Data published on Tuesday by Halifax, which is owned by Lloyds Bank, showed that house prices in the country continued dropping in April. Annual house prices slowed by 0.3% as mortgage rates remained at an elevated level. It was the first time that house prices dropped in more than a decade. In a statement, an analyst at Barclays said:

“We think the MPC will keep options open in a balanced manner, reiterating that evidence of persistent inflationary pressures could require further tightening, while signaling that it might pause if data comes in line with MPR projections.”

The actions of the Bank of England are important for Lloyds Bank because of its role in the economy. It is the biggest bank, where it serves more than 25 million customers. The most recent results showed that Lloyds profit after tax came in at £1.6 billion while net income jumped to £4.7 billion. Net interest income rose by 20%. Therefore, higher rates will likely lead to more profits in the current quarter.

Lloyds share price forecast 

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Lloyds share price

LLOY shares have been a bit boring in the past few months. After peaking at 52.65p in February, the shares have retreated to 46.42p. It is consolidating at the 25-day and 50-day moving averages while the Relative Strength Index has moved below 50. The stock has remained above the ascending trendline shown in blue.

Therefore, I suspect that the shares will remain in this range after the BoE decision on Thursday. As I wrote in this article, I wouldn’t recommend investing in Lloyds because of its weak returns over the years.

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