Key takeaways
- In line with our base case, the Bank of England kept monetary policy unchanged.
- The Bank of England signals that a rate hike will be appropriate in coming months if data is broadly in line with expectations. Governor Andrew Bailey linked rate hikes to labour market outcomes (echoing Fed Chair Jerome Powell yesterday).
- We continue to expect three hikes next year (15bp in February 2022, 25bp in May 2022 and 25 in November 2025, so 65bp in total). Markets are pricing in approximately 90bp over the same period.
- FX: EUR/GBP moved higher on announcement and near-term there are upside risks. We continue to target 0.83 in 12M, however.