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☆ Bank of England to raise Bank Rate to 5.50% in September, significant minority expect further hike: Reuters poll
▼ + stars: | 2023-09-14 | by ( Shaloo Shrivastava | ) www.reuters.com time to read: +4 min

Nearly all 65 economists in the Sept. 11-13 Reuters poll expected the BoE to hike its Bank Rate by 25 basis points to 5.50% this month, in line with interest rate futures pricing. Survey medians showed the Bank Rate was expected to peak at 5.50%, matching rate futures pricing, and stay there until mid-2024. While 28 economists expected the Bank Rate to peak at 5.75%, two said 6.00%. Nine of 16 gilt-edged Market Makers (GEMMs) that participated in the poll predicted a 5.50% peak rate and seven said 5.75%. A separate Reuters poll showed average house prices in Britain were predicted to fall 4% this year and flatline in 2024 before rising in 2025.

Persons: BoE, Maja Smiejkowska, Ellie Henderson, BoE Governor Andrew Bailey, Catherine Mann, Shaloo Shrivastava, Anitta Sunil, Purujit Arun, Maneesh Kumar, Pranoy, Ross Finley, Hari Kishan, Mark Potter Organizations: Bank of England, REUTERS, Rights, Reuters, HSBC, MPC, Royal Institution, Chartered Surveyors, Thomson Locations: London, Britain, Investec

☆ Why inflation makes Britain’s debt the costliest among rich economies
▼ + stars: | 2023-08-22 | by ( Hanna Ziady | ) edition.cnn.com time to read: +4 min

Interest payable on UK central government debt hoovered up £7.7 billion ($9.8 billion) last month alone, hitting a record for July, the Office for National Statistics said Tuesday. That’s double the share in Italy, whose dependence on inflation-linked debt comes second only to that of the UK among advanced economies, according to Fitch Ratings. According to Fitch, Britain now spends more to service its debt than any other developed economy, as a percentage of government revenue. In a statement Tuesday, Hunt said: “As inflation slows, it’s vital that we don’t alter our course and continue to act responsibly with the public finances. Only by sticking to our plan will we halve inflation, grow the economy and reduce debt.”

Persons: That’s, ”, Ellie Henderson, Fitch, ” Ruth Gregory, Jeremy Hunt “, Gregory, Hunt Organizations: London CNN, National Statistics, United, Fitch, “, Investec, AAA, Capital Economics, CNN, Conservative Locations: Ukraine, United States, Italy, Fitch, Britain, London

☆ UK inflation slows to 6.8% but services are getting even more expensive
▼ + stars: | 2023-08-16 | by ( Hanna Ziady | ) edition.cnn.com time to read: +2 min

That is the smallest annual rise since February 2022 and reflects falls in the price of gas and electricity after an energy price cap, set by the energy regulator, was lowered at the end of June. “Although remaining high, food price inflation has also eased again, particularly for milk, bread and cereal,” said ONS deputy director of prices Matthew Corder. Food price inflation slowed to 14.9% in July, from 17.4% in June, with prices still rising strongly but less than in June. In less good news, services inflation accelerated last month to 7.4%, from 7.2% in June. “With labor costs being the bulk of the expense for services providers, the Bank of England may deem that more work has to be done to ensure that services price inflation is contained,” said Ellie Henderson, an economist at Investec in London.

Persons: ”, Matthew Corder, Ellie Henderson, Jamie Dutta Organizations: London CNN —, National Statistics, Bank of England, Investec, Financial Locations: “, London

☆ Bank of England to press on with rate hikes, peak at 5.00% in Q3
▼ + stars: | 2023-06-14 | by ( Jonathan Cable | ) www.reuters.com time to read: +4 min

In December 2021 the BoE was one of the first major central banks to draw a line under its ultra-loose pandemic-era monetary policy. It has now raised borrowing costs by 440 basis points across 12 consecutive meetings in modest-sized rate rises. All 64 economists polled June 12-14 said the BoE would add another 25 basis points to Bank Rate on June 22, taking it to 4.75%. A majority of economists surveyed, 52 of 64, said Bank Rate will have peaked by end-August with the median forecast putting it at 5.00%. Although starting later, both the Fed and the European Central Bank have largely been raising rates in greater magnitudes than the BoE.

Persons: BoE, Ellie Henderson, BoE Governor Andrew Bailey, Jonathan Haskel, Catherine Mann, Megan Greene, Silvana Tenreyro, Stefan Koopman, Investec's Henderson, Jonathan Cable, Aditi Verma, Anitta Sunil, Ross Finley, Catherine Evans Organizations: Bank of England, Monetary, Committee, Rabobank, U.S . Federal, Fed, European Central Bank, Reuters, Thomson Locations: Investec

☆ Bank of England to lift rates to 4% on Feb 2, finish at 4.25% in March - Reuters poll
▼ + stars: | 2023-01-24 | by ( Jonathan Cable | ) www.reuters.com time to read: +3 min

REUTERS/Dado Ruvic/IllustrationLONDON, Jan 24 (Reuters) - The Bank of England will lift the Bank Rate by 50 basis points on Feb. 2 to 4.00% and then add another 25 basis points in March before pausing, according to a Reuters poll of economists who said the greater risk was that it would do even more. A firm majority, 29 of 42 respondents to the Jan. 18-24 poll, said the Bank would add 50 basis points next Thursday. Median forecasts in the poll showed the Bank would then add 25 basis points in March, giving a peak rate of 4.25%. Markets are pricing in a peak of 4.50% for Bank Rate. However, the poll showed GDP falling 0.3% this quarter and next and 0.1% in the third quarter.

But since mid-May, when rates futures markets began to bet outright that the Fed would cut rates in the second half of next year, markets have stabilized. Rates futures have raised the 2023 implied fed funds terminal rate by 400 bps to around 5% and the Fed has raised its 'dot plot' forecasts, in a broadly lockstep move. But since mid-May the implied 2023 terminal rate has been brought forward to the first half of the year, and rate cuts have been priced into the second half. Yet policymakers' 2023 economic growth forecast has slumped to 0.5% - it was 2.25% in March - and they now see unemployment topping 4.5%. Powell's comments are pushing Wall Street lower on Thursday, but interest rate markets largely have dismissed them and continue to price in more than 50 bps of rate cuts next year.

Consumer prices rose 11.1% in the 12 months to October, the most since October 1981 and a big jump from 10.1% in September, the Office for National Statistics said on Wednesday. Economists in a Reuters poll - many of whom think inflation is probably peaking around now - had forecast inflation would rise to 10.7%. In response to the data, Hunt - who is due to outline a new budget on Thursday - said "tough but necessary" decisions were required to tackle rising prices. Producer price data showed there was still inflation pressure in the pipeline but hinted at a possible slowdown. Manufacturers' costs for raw materials and energy rose at their slowest pace since March but at 19.2% the increase was still huge by historical standards.

Updated projections from the Fed's Sept. 20-21 policy meeting show that rate-setters' outlook for the economy's equilibrium rate of interest rate over time remained 2.5%. Bearing in mind that the Fed's inflation target is 2.0%, this suggests that the real rate of interest - r-star (r*), the nebulous, inflation-adjusted interest rate that neither fuels nor curbs growth - is also unchanged at 0.5%. The fact it didn't suggests the Fed still sees sky-high inflation as ultimately 'transitory', albeit as a result of its punishing interest rate rises and more prolonged than it had previously anticipated. chartNEBULOUS RATEThe Fed's policy target rate is now 3.00%-3.25%, the highest since 2008, and the Fed's latest projections show it rising to the 4.25%-4.50% range by the end of this year and ending 2023 at 4.50%-4.75%. Steven Englander, head of FX strategy at Standard Chartered, suggests the neutral rate is perhaps 3.00%, maybe even higher.

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