BoE: First major central bank to start hiking cycle

In Short

We expect the BOE’s Monetary Policy Committee to hike Bank Rate by 15 bps tomorrow. However, we prefer this date to the next meeting on December 14 only by a small margin. The main arguments for tomorrow are the possibility to explain the decision in a context of a regularly updated macro projection and a press conference.

Highlights:

  • The Bank of England (BoE) is more likely than not to hike its Bank Rate tomorrow by 15 bps to 0.25%. Otherwise, we see the hike on December 14. We expect a second hike by 25 bps in February and a third one to 0.75% late next year.
  • This path is considerably more cautious than markets currently price in with a Bank Rate at 1.25% before the end of 2022. Accordingly, we see a (at least implied) push-back to market rates which could come from the MPC’s forward guidance, voting results or inflation outlook.
  • If the BoE softens market expectations tomorrow as expected, the rise in short-dated yields will also be dampened – but we do not forecast a lasting impact on the long end.
  • We will discuss the outlook in more depth in a Focal Point to be published over the next days.

Download the full publication below

BoE: First major central bank to start hiking cycle
Picture

© Generali Investments, all rights reserved. This website is provided by Generali Investments Luxembourg S.A. (Generali Investments) and is considered as a marketing communication and financial promotion related its products and services. This website may contain information related to the activity of the following companies: Generali Asset Management S.p.A. Società di gestione del risparmio, Infranity, Sycomore Asset Management, Aperture Investors LLC (including Aperture Investors UK Ltd), Plenisfer Investments S.p.A. Società di gestione del risparmio, Lumyna Investments Limited, Sosteneo S.p.A. Società di gestione del risparmio, Generali Real Estate S.p.A. Società di gestione del risparmio, Conning* and among its subsidiaries Global Evolution Asset Management A/S - including Global Evolution USA, LLC and Global Evolution Fund Management Singapore Pte. Ltd - Octagon Credit Investors, LLC, Pearlmark Real Estate, LLC as well as Generali Investments CEE. *Includes Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”).