Commenting on The Bank of England interest rate, Melanie Baker, Senior Economist at Royal London Asset Management said:
“The MPC (Monetary Policy Committee) signalled that more interest rate rises were likely but that they felt the peak priced in by markets was too high. They were not entirely clear exactly which figure they were referring to as the market ‘peak’ in this context though.
“Despite another set of grim forecasts for the real economy, including for the unemployment rate, they hiked 75bp today. It is clear that their focus remains inflation. They see risks to their inflation forecasts as skewed to the upside and this appears to be an important element of their thinking.
“Interest rate hikes, in an effort to lower inflation, are worsening the near-term economic outlook. The decision, forecast and minutes today are consistent with downside risk to my forecast peak for UK interest rates at 4.5. However, with domestically driven inflation pressures still looking relatively strong and fiscal policy uncertain, the skew of risk to my forecasts may change again before the end of the month.”
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The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.