Analysts divided over rates, pound jumps
Published on 21.06.2018 19:05

The British pound received a much-needed boost today after the latest monetary statement earlier today from the Bank of England fueled expectations of a rate hike in the coming months.

Although the BOE decided to keep rates on hold, the vote was split 6 to 3 which was higher than the figure of 7 to 2 that most analysts expected, and with another rate hawk on board the chances of a rate hike or two have increased dramatically.

The market has now priced in a 66 percent chance of a 25-point rate hike in August up from nearly 49 percent before the BOE made the announcement regarding interest rates.

"We doubt that the MPC will sit on its hands for too much longer. Provided that GDP growth rebounds and earnings growth strengthens as we expect, we remain confident in our view that the next rate hike will come in August, with another following in November." Said Ruth Gregory at Capital Economics.

Some however believe a rate hike is still a long way off and the market should overlook the recent inflation figures, which came in below expectations as well as the uncertainties surrounding Brexit ,which will be enough to keep the BOE from raising rates until 2020.

"Today's decision strengthened the case for a rate hike in August. For now, however, we stick to our forecast that the Bank of England leaves its policy rate unchanged throughout 2018 and 2019” said Andreas Wallström at Nordea Markets.

“We expect a bleak economic development going forward which, coupled with the fading inflationary boost from currency development, will hold back inflationary pressures." He added,

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Andrew Masters

Analyst

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