UK: BoE sticks to script, risk is not doing enough (analysts)

Today focus on the Bank of England which, as expected, raised rates by 50bps. This is the second consecutive 50bp hike, bringing the rate to 2.25%. Markets had considered the possibility of a 0.75% hike given the external pressure from the hawkish communications from the Fed and the ECB. Ultimately, though, the BoE stuck to its most recent action plan, with key members of the Monetary Policy Committee, including Bailey, opting for a calmer and more measured approach, having hiked rates earlier. of other central banks “, comments Neil Mehta, Portfolio Manager, BlueBay Asset Management, adding:” The main risk of this strategy is that the BoE is not doing enough right now, with repercussions especially on the foreign exchange channel: if the pound should it fall further, pressure will increase for the UK central bank to take a bigger step in November. We continue to believe inflation in the UK will be more persistent than in Europe, supported by the Energy Guarantee and further tax cuts by the new government, which likely means the BoE will have to leverage these pressures, continuing to raise. rates in the first half of 2023. The situation of long-term gilts for the next year remains negative ”.