BoE unlikely to signal end of rate hike cycle

Comment: BoE unlikely to signal end of rate hike cycle – by Daniela Hathorn
 
“Markets are assigning an 83% chance that the Bank of England (BoE) will raise interest rates by a further 25bps to 5.5% when it meets on Thursday. This looks likely against a backdrop of slow growth, slow employment and stubbornly high pricing pressure. Beyond the BoE’s meeting on Thursday, markets will be looking for signs of what might come next for the UK rate hiking cycle.

What the BoE does after Thursday will largely rest on CPI data out tomorrow. Other central banks— namely the ECB and possibly the Fed tomorrow—have started to signal the end of rate hikes. We don’t believe the BoE is in a position to do the same [ signal the end of rate hikes ]. CPI is forecasted to rise once again to 7% and growth has dropped significantly as per the latest GDP figures. It’s a very tricky situation for the BoE to navigate with stagflation a real concern and with wage pressures remaining elevated, we don’t believe we see a positive reaction in GBP unless we see a 50 bps hike on Thursday, which seems unlikely at present.”
 
Daniela Hathorn is Senior Market Analyst at brokerage firm, Capital.com