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☆ Bank of England set to raise rates to 3.5% after inflation hits 41-year high
▼ + stars: | 2022-12-07 | by ( David Milliken | ) www.reuters.com time to read: +4 min

Financial markets currently price in a 78% chance that the BoE will raise rates by half a percentage point to 3.5% on Dec. 15, and a 22% chance of a rise to 3.75%. "The BoE has made it pretty clear that inflation is too high. With a range of views on the MPC about how near BoE rates are to a peak, a first-ever four-way vote split was possible, she added. Last month, seven MPC members voted to raise rates to 3%, but Silvana Tenreyro voted for a quarter-point rise to 2.5% and Swati Dhingra for 2.75%. Financial markets currently see BoE rates peaking at 4.75% by the middle of next year, while HSBC expects the BoE to stop at 3.75% in February and Investec predicts a peak of 4%.

By contrast, the median forecast for a similar poll on the U.S. Federal Reserve is exactly where futures currently price the Fed's terminal rate next year - 5.0%. Any reversion of terminal rate pricing to consensus or below could see the pound wobble again. "That said, we have been stressing downside risks to our terminal rate projection, given the constant dovish messaging from the MPC. BoE poll question on Terminal Rate Risks? Central Bank Rate Hike CampaignSterling volatilityThe opinions expressed here are those of the author, a columnist for Reuters.

LONDON, Nov 24 (Reuters) - Bank of England Deputy Governor Dave Ramsden backed more interest rate hikes on Thursday, but said he would consider cutting rates if the economy and inflation pressures panned out differently to his expectation. But Ramsden also said he would "continue to vote to respond forcefully" if inflation pressures proved to be more persistent than expected. The BoE has raised interest rates eight times since December 2021. Ramsden said the government's budget statement published earlier this month - comprising tax rises and spending restraint - was likely to push down on economic growth and inflation. "However, the vast majority of these measures do not come into effect until April 2025 so will have very little effect over the MPC's three-year forecast horizon, relative to what was assumed in the November MPC," Ramsden said.

☆ Morning Bid: Bear Hunt
▼ + stars: | 2022-11-17 | by ( ) www.reuters.com time to read: +5 min

Long-term sovereign bond yields have been falling sharply all week in advance of finance minister Jeremy Hunt's new budget, dragged down largely by U.S. disinflation hopes. UK 10- and 30-year gilt yields outperformed, however, dropping to their lowest since early September before backing up slightly on Thursday. U.S. housing starts numbers out later will give another glimpse at the state of the ailing property sector. Reverberations continued around the world from this month's latest implosion in the crypto universe and the failure of the FTX exchange. Major crypto player Genesis Global Capital suspended customer redemptions in its lending business on Wednesday, citing the FTX collapse.

☆ Bank of England's Tenreyro sees rates on hold, then falling in 2024
▼ + stars: | 2022-11-11 | by ( ) www.reuters.com time to read: +2 min

"Policy would then have to loosen, perhaps in 2024, to try to prevent inflation falling below target." A majority of Tenreyro's colleagues backed a 75 basis-point hike which took Bank Rate to 3%. "Too high a path for Bank Rate therefore risks over-steering inflation below target in the medium term." But it signalled that some further increase in borrowing costs was likely to be needed to snuff out the risks of an inflation rate currently above 10%. Tenreyro said demand in Britain was likely to weaken even if energy prices fall back.

☆ BoE should stand firm on inflation despite economic slowdown-Haskel
▼ + stars: | 2022-11-11 | by ( ) www.reuters.com time to read: +1 min

LONDON, Nov 11 (Reuters) - Bank of England interest rate-setter Jonathan Haskel said signs of a slowdown in Britain's economy did not imply a need for less tightening of monetary policy and the central bank should "stand firm" against the risk of persistent inflation pressure. "The concern for me is the risk that if price rises become embedded, monetary policy would have to be tighter for longer, prolonging a UK recession," he said. Therefore, right now, I believe it important for monetary policy to stand firm against the risk of persistent inflationary pressure." Haskel was one of seven members of the BoE's Monetary Policy Committee who voted last week for a 75 basis-point increase in Bank Rate, the biggest increase in borrowing costs by the central bank since 1989. Writing by William Schomberg; editing by Sarah YoungOur Standards: The Thomson Reuters Trust Principles.

Markets were expecting Bank Rate to peak at around 4.7%, little changed by the BoE's announcement. [1/2] A general view of the Bank of England (BoE) building, the BoE confirmed to raise interest rates to 1.75%, in London, Britain, August 4, 2022. The BoE has faced weeks of political and financial market chaos since its last rate rise on Sept. 22. Markets are now more stable, with British government borrowing costs broadly back to where they were before the turmoil. Under the BoE's forecasts, inflation is due to fall below its 2% target by mid-2024, even if interest rates stay at 3%.

☆ Bank of England makes historic rate hike despite 'very challenging' outlook
▼ + stars: | 2022-11-03 | by ( ) www.reuters.com time to read: +5 min

By David Milliken and Andy BruceLONDON, Nov 3 (Reuters) - The Bank of England raised interest rates to 3% on Thursday from 2.25%, its biggest rate rise since 1989 as it warned of a "very challenging" outlook for the economy. "Further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets," the BoE said in unusually specific guidance to investors. Just before Thursday's policy decision, markets expected rates to peak at around 4.75%. "The Committee continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary," the MPC added. (Reporting by David Milliken and Andy Bruce)((uk.economics@reuters.com; +44 20 7513 4034))Keywords: BRITAIN BOE/DECISIONOur Standards: The Thomson Reuters Trust Principles.

☆ Morning Bid: Dysfunction and intervention
▼ + stars: | 2022-09-29 | by ( ) www.reuters.com time to read: +5 min

Amid all the chaos in British bond markets, the forced intervention by the Bank of England to buy gilts has given some investors a crumb of comfort about the limits of central bank tightening. Cold comfort maybe, but enough to drag bond yields back and lift stocks briefly around the world. While 30-year gilt yields steadied just below 4% on Thursday after their 100bp swoon the previous day, the pound was sliding again and UK midcap stocks dropped. read moreEasing inflation in Spain was better news read more . Market leader Inditex (ITX.MC), the owner of Zara, slipped 2.2%, while the wider STOXX retailers index <.SXRP> slid 4.3%.

☆ Morning Bid: Pounded
▼ + stars: | 2022-09-26 | by ( ) www.reuters.com time to read: +2 min

Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. On Friday, gilts suffered their heaviest selling in decades, and before that, the yen and U.S. interest rate futures have been roiled. Global tension is also mounting over the war in Ukraine, as Russia holds widely-criticised votes aimed at annexing territory it has taken by force. Besides sterling, Asian stock markets fell on Monday. European futures fell 0.3% and S&P 500 futures fell 0.6%.

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