BoE is widely expected to raise interest rate by 75bps to 3.00% today. That would be the eighth consecutive rate rise, and the largest since 1989.
Governor Andrew Andrew Bailey had already indicated earlier that “inflationary pressures will require a stronger response than we perhaps thought in August.” Additionally, Deputy Governor Ben Broadbent also indicated that “the government’s Energy Price Guarantee has the effect of limiting headline inflation and, to that extent, any related strengthening of second-round (and more persistent) effects on domestic inflation.”
There are talks that the Bank Rate would hit 3.50% in December, and tightening will continue to 4.75% next May. Yet, the path forward remains complicated by the uncertainty over the new government’s new budget. Prime Minister Rishi Sunak’s plan on spending cut and tax hike won’t be revealed until a fiscal statement later on November 17. While the new economic projections by BoE may not matter much, the voting today could at least show the bias among MPC members.
Some previews on BoE:
- Bank of England Might Disappoint Amid Uncertainties about the Budget
- BoE Preview: A Dovish 75bp Hike
- Bank of England Preview
As per market reaction, GBP/CHF would be one to watch. Rise from 1.0183 stalled after hitting 61.8% projection of 1.0183 to 1.1283 from 1.0893 at 1.1574. For now, further rise is expected as long as 1.1283 resistance turned support holds. Firm break of 1.1574 will target 100% projection at 1.1993.
However, sustained break of 1.1283 will argue that whole rebound has completed, and bring deeper fall back to 1.0893 support and possibly below. If happens, that could be a signal of return of Sterling selloff elsewhere.
