ECB will continue carrying out its aggressive policy towards reducing inflation while the BoE still does not seem to be eager to raise interest rates anytime soon. All of the analysts who submitted their predictions about the upcoming meetings of both central banks agree in this respect. Despite the fact that in comparison with other central banks ECB is considered to be "the most hawkish on inflation and it showed as much by being the first to raise rates since the financial crisis," according to Nick Nasad, the majority of polled experts think it will not raise interest rates in May. "The ECB isn't expected to raise the rates in the upcoming meeting. Jean-Claude-Trichet used the code words 'monitor closely' in the last meeting, which means a pause now," reminds Yohay Elam, an analyst with Forex Crunch. The BoE on the other hand is behaving much more cautiously as far as rising interest rates is concerned, even though "recent BoE's Inflation Report implies that it's very likely that inflation will settle above the 2% target in the medium term," as Alberto Muñoz points out. Also the fact that GDP had finally shown growth in the first quarter of 2011 would suggest a move towards an interest rate hike, but as Adam Narczewski believes: "The economy is not recovering as quick as expected and higher interest right now, without the support of macro data, do not make sense." The BoE meeting will take place on May 5 at and the ECB meeting on May 12. Read below the complete forecasts and opinions of the experts. Nick Nasad - Chief Market Analyst at FXTimes: ECB: "If we are talking about the main central banks – the Fed, ECB, BoE, BOJ – then no doubt the ECB currently is the most hawkish on inflation and it showed as much by being the first to raise rates since the financial crisis. The Fed is not likely to raise rates this year, the Bank of Japan trails even the Fed, while the Bank of England is trying to nurse an uneven recovery. The ECB is set to raise interest rates another 50 basis points this year, to 1.75%. I think we can expect them do so in 3 month intervals, around July and October. However, conditions can change on the ground if inflation falls back or the sovereign debt crisis erupts as a result of a Greek debt restructuring that is done incorrectly. The chances of a disorderly restructuring are so far being discounted, and the EUR/USD seems set to continue climbing as long as the Fed takes a slow approach to normalization and underlying inflation in the US remains tame. The Fed is just beginning to lay out its exit strategy, starting with today’s FOMC announcement. Unless the Fed ups its rhetoric on inflation, and turns hawkish, the conditions for the EUR/USD to rally to 1.50 on interest rate expectations are in place in the next 1-2 months." BoE: "The next Bank of England meeting is set for May 5th, and I do not see the MPC raising rates. While the 1st quarter UK GDP data was encouraging, the economy remains on uneven footing. The bank had expected a gain in GDP of 0.8% in the first quarter and for all intensive purposes, the report does put a final nail in the coffin of a rate hike next week. The catalysts for the elevated inflation figures are predominantly fed by higher energy and commodity prices (imports) and the pass through of higher taxes in the form of a higher VAT. Those 2 factors are not going to respond as easily to a rate hike and instead it will put pressure on households and business in the form of higher borrowing costs. The BoE likely needs more data to sift through before deciding whether to hike rates. The Bank of England can’t push off higher interest rates for that much longer, though they would like to see a more sustainable path for the recovery. That should boost the GBP/USD in the medium term. However, with austerity measures coming down the pipe, there is a chance that the central bank awaits its next forecasts in August before deciding to move on rates, a preposition that would weaken the GBP against its other rivals that are set to raise rates this year (ECB, RBA, BOC)." Ed Ponsi - President of FXEducator LLC: ECB: "A stable price environment is positive for growth. The ECB is definitely the most hawkish of the major central banks right now, and with good reason. Trichet correctly perceives the dangers of inflation and the expectations for future inflation. If companies are allowed to plan and operate without the specter of rampant inflation, at least one layer of uncertainty is removed." BoE: "The policies of the Bank of England, while technically positive for growth, create inflation. Uncertainty over future prices create a hazard for business, making it difficult to plan ahead. While BoE policy is designed to boost growth, the resulting inflation has the opposite of the desired effect. If inflation expectations are allowed to run wild, growth will suffer. This is the same conundrum currently faced by the Fed. The Bank of England's Monetary Policy Committee will not raise rates until July at the earliest. The MPC will soon lose its most hawkish member, Andrew Sentance, so the doves will remain firmly in control for the foreseeable future." Valeria Bednarik - Chief Analyst with FXstreet.com: ECB: "Not sure if hawkish is the right term for ECB. The bank was created to deal with inflation and nothing else, so now that the euro zone is finally seeing an increase in CPI readings the ECB can justify its reason to exist. After recent 0.25bp rate increase, market is mostly disappointed of not getting an advance of further rate hikes: currently we are pricing in just another 0.75bp for this year, and unless they turn actually hawkish, and announce a continued rate hike, sovereign debt jitters, Greece default and spread differentials, will finally weight on the common currency. I would expect the ECB to leave rates unchanged this May at 1.25%." BoE: "Market has been quite disappointed on recent BoE outcomes, as latest Minutes shown votes remain 6-0-3. That’s one of the main reasons Pound is unable to pick up momentum against major rivals and despite current dollar weakness. A surprise rate hike, will no doubts favor the UK currency, with GBP/USD accelerating higher and probably approaching to 1.70 price zone over the next couple of weeks. However, a no change stance, won’t be so hard to the downside for the pair, as is what most investors expect. Only chance Pound has now, comes from the small possibility of policy makers start talking about removing facilities from the market, quite unlikely for this May. I would expect ECB to leave rates and QE unchanged at 0.50 and 200B." Joseph Trevisani - Chief Market Analyst at FX Solutions,LLC: ECB: "The ECB is the most hawkish of the major CBs, US, Japan and UK but not the most hawkish of the major currencies, that is probably the RBA . It will hike at least one and probably twice more this year. The more the ECB hikes the stronger the Euro becomes. Only a sovereign default or failed auctions for Spain or Italy cold derail a higher euro, or I suppose a worldwide recession or a change in Fed policy." BoE: "I don't think the BoE will raise rates the next meeting. The economy is weak and the last inflation report was better than expected though still at 4.0%. The MPC will wait for more evidence. The sterling like the euro is stronger because of dollar weakness than it would be on its own competing against a normal dollar." Ilian Yotov - FX Strategist and Founder at AllThingsForex: ECB: "With consumer prices well above the 2% comfort level, the European Central Bank has been very clear about their goals to keep inflation in check and to make sure that 'second-round effects do not materialize'. This is the kind of language that has been and could continue to keep the EUR well-bid ahead of the meeting. However, although the ECB is expected to raise rates another time or two this year, policy makers could decide to prudently maintain the benchmark rate unchanged at 1.25% following last month’s rate hike. If such decision is coupled with a less hawkish ECB statement, a welcomed price correction of the euro’s gains could get underway." BoE: "Will they or will they not raise rates this time around? Each month we go through this drill and month after month the Bank of England has decided to sit on the sidelines. But things could be different at this meeting, especially if the recent U.K. GDP data has managed to reassure the Monetary Policy Committee that the economy’s return to growth in the first quarter of 2011 after contracting in Q4 2010 creates an appropriate environment to accommodate the long-awaited by the markets rate hike. Needles to say, an increase in the benchmark rate could serve as a catalyst for further GBP strengthening, while another month of 'sit and wait' decision by the Bank of England could trigger profit-taking of GBP long positions." Adam Narczewski - Financial analyst at X-Trade Brokers, XTB: ECB: "After the interest rate hike in April, in May the European Central Bank will take a break and leave interest rates unchanged. I expect the ECB to act in the third quarter, maybe even in July. After that, the end of the term of Trichet as president of the ECB will be approaching and the future monetary policy might depend on the vision of the new president. Nevertheless, the ECB will remain the most hawkish central bank due to high prices of oil and food which will keep the inflationary pressures. The EUR/USD has no clear reasons to decline at this moment. The dollar will regain ground if the Fed’s statements become more hawkish." BoE: "I do not see the Bank of England rising interest rates on the next meeting but the first interest hike in the third quarter is still real. Much will depend on inflation data. If it stays low like in March, the BoE will not change its monetary policy. Only if prices do go up, it will give a reason for an interest hike. The economy is not recovering as quick as expected and higher interest right now, without the support of macro data, do not make sense. The weakness of the USD might cause the GBP/USD to attack even 1.7000, a corrective movement is expected if the BoE’s statement will be very dovish." Yohay Elam - Analyst Forex Crunch: ECB: "The ECB isn't expected to raise the rates in the upcoming meeting. Jean-Claude-Trichet used the code words "monitor closely" in the last meeting, which means a pause now. The focus will be, once again, on the press conference. A use of the words 'strong vigilance' will indicate a hike in June, while a repeat of the previous wording will hint another pause. A lot depends on the upcoming flash estimate for the headline CPI. The ECB is the most hawkish central bank. They began the tightening cycle before Japan, Switzerland and the US. Britain has a much higher inflation rate (both headline and core) but the central bank in Britain looks also at the state of the economy" Trichet's policy seems to lean towards Germany. Further rate hikes depend on the headline CPI in the upcoming months. One more hike is very likely. Two cannot be ruled out, but no more than that." BoE: "I don't see the BoE raising rates anytime soon. The most recent meeting minutes have shown that a hike in June or July will be very early. With an ease in inflation (4%) and the impact of austerity still not fully felt, the MPC is likely to leave the rates unchanged. This will probably weaken the pound marginally." Alberto Muñoz - Forex Analyst at FXstreet.com: ECB: "ECB looks the most hawkish central bank compared to the Fed and BoE. Inflation has exceeded ECB's target, and Eurozone PPI has posted its biggest jump in almost two-and-a-half years in February, so we should expect additional rate hikes in the next months, though I wouldn't expect to finish year with rates above 2.00%. Anyway, if market participants are increasing their interest rates expectations, we should see EURUSD near 1.5000 in the next 2-3 months Forecast: ECB will leave rates unchanged in May, though Trichet could be more hawkish this time." BoE: "Though some analysts are pointing that scenario, I don't think BoE will raise interest rates in the next meeting though recent BoE's Inflation Report implies that it's very likely that inflation will settle above the 2% target in the medium term. But MPC remains divided, as the minutes of April meeting suggest that the 6-3 split in favour of keeping rates at 0.5% is unlikely to change during May. Forecast: BoE will leave rates unchanged in May."

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