Markets expect between one and two more 25 bps hikes by year end
11 May 2023What a difference a few months make, particularly if you work at the Bank of England (BoE). Signalling the slam-dunk likelihood of a recession at the start of a year, Governor Andrew Bailey at the BoE now sees no chance of any quarters showing negative growth and has upgraded the growth forecast dramatically, in fact the largest upgrade ever.
Raising rates by 25 bps, the 12th consecutive rise over the last 18 months, takes the policy rate back to where it was in 2006. A little more hawkish than the Federal Reserve in the meeting minutes but equivalent to the European Central Bank, the BoE is still determined to move higher if inflation keeps it up at night and refuses to soften. Judging by the BoE’s comments, it does not see inflation softening as quickly as Prime Minister Sunak wants.
Markets expect somewhere between one and two more hikes of 25 bps by year end but given how volatile the BoE’s messaging has been so far under Bailey, and by inference its credibility, that may be either over or under-pricing what actually happens.
Important legal information
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not an indicator for the current or future development.