Market expectations for Bank of England rate rise shift to early 2022

UK interest rate updates

Investors expect UK interest rates to rise by February next year after the Bank of England has expressed growing concern over rising inflation. Some see the 2021 rise as an external possibility.

Sterling was boosted by the prospect of rising borrowing costs, but the price of UK government debt fell as traders placed bets at the time of the first rate hike.Market movement came later BoE rate setter They unanimously voted to keep interest rates at record lows of 0.1%, but said they expect inflation to exceed 4% this winter.

Although the decision to keep interest rates unchanged was widely expected, investors voted by two of the nine strong Monetary Policy Committees to end BoE’s bond purchase program with the central bank on monetary policy. He said he immediately showed that he was approaching tightening.

Multi-asset Oliver Blackborn said a vote by Vice Presidents Dave Ramsden and Michael Sanders “shows a growing hawkish attitude towards monetary policy. Portfolio Manager at Janus Henderson Investors. Thursday. Prior to the meeting, the market was not fully priced with a rate rise to 0.25% until next summer.

Investors were also surprised by the MPC’s unanimous agreement that interest rates could rise even before the end of the current asset purchase program scheduled for the end of the year.

Theo Chapsalis, Head of UK Rate Strategy at NatWest Markets, said: “Until today it wasn’t.”

The pound, which had been struggling last week, rebounded as Britain’s economic recovery showed signs of slowing. It traded 0.6 percent higher than the dollar at $ 1.371.

UK Treasury prices fell and 10-year Treasury yields rose 0.09 points to 0.88%, the highest level in three months.

According to Pimco’s portfolio manager Peder Beck-Friis, the BoE has the potential to strike a tricky balance in a compelling market that can keep up with inflation expectations while at the same time responding to the economic slowdown.

“BoE may face tough trade-offs later this year,” said Beck-Friis. “Inflation is rising, but activity is slowing faster than expected. Previously, we expected the BoE to start raising rates in the second half of next year, but the risk of raising rates early in the first half of next year increases. I am. “

Market expectations for Bank of England rate rise shift to early 2022 Source link Market expectations for Bank of England rate rise shift to early 2022

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