PREVIEW: BoE rate decision and minutes due Thursday, 22nd September, 2022 at 12:00BST/07:00EDT

• Expectations are for the MPC to raise the Bank Rate by 50bps to 2.25%, according to most analysts polled in a Reuters survey, though there are some calls for a 75bps move. The decision to hike rates will likely be unanimous, however the vote over the magnitude of the hike could be subject to some dissent in both a hawkish and dovish direction. Money market pricing expects a 75bps rate rise this week, and foresees rates rising to 3.75% by the end of the year. More aggressive market pricing have emerged in wake of larger rate rises at other global central banks – like at the ECB, Fed and Riksbank this week – with the inflationary outlook for the UK bleak following the 80% increase in the October OFGEM price cap, with further advances expected in January and April. However, the recent energy support package presented by newly-appointed UK Prime Minister Liz Truss has shifted the dial on the inflationary outlook. Despite the near-term implications likely being welcomed by the MPC, Oxford Economics expects the price cap “will support disposable incomes and spending, and keep the labour market tighter than anticipated. This would increase the risk of higher inflation in the medium-term.” As such, there is a growing belief amongst market participants that the MPC may need to keep their foot to the rate hiking pedal and delay any prospective rate cuts that some had been hoping for in 2023. With this in mind, the statement will be eyed to see if the MPC reaffirms its commitment to act “forcefully” in the face of inflationary pressures. Also of note for the announcement will be focus on the confirmatory vote for the Bank’s Gilt selling programme. To download the report, please click here
  


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21 Sep 2022 - 08:39- Fixed IncomeResearch Sheet- Source: Newsquawk