Trick or treating might be over this year, but the Bank of England (BoE) decided that not altering rates at its committee meeting was the better treat(ment) for markets at present.
04 November 2021
This is in contrast to market expectations that rates would rise, based on the telegraphing over recent weeks from Governor Bailey about the urgency of containing inflation. It seems to many that the need to be an ‘unreliable boyfriend’ is a requirement for the top job at the BoE. Cutting its forecast for growth, which the BoE now sees at 5% in 2022 (from 5.3% previously), due to rising inflationary effects and continued supply issues was less welcome news for markets to deal with. It is a short-term treat for markets that rates aren’t moving higher but the medium-term effects on a slower growing economy facing an inflationary battering might be the trick that they missed at this meeting. Sterling is fading on the news (adding additional inflationary import costs). Like a Halloween hangover, this BoE is damned if they do and damned if they don’t and may be walking blindly into the arena of policy errors.
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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.