Steve Matthews, Liquidity Fund Manager, Canada Life Asset Management, shares his thoughts ahead of the Bank of England Interest rate decision on Thursday.
He said: “We expect the Bank of England (BoE) to raise its Base Rate by 50bp on Thursday to take it to 4.00%.
“Markets are currently pricing 38bp of hikes for the meeting next week, which reflects the balance of hawks and doves within the Monetary Policy Committee (MPC). We expect the vote to be split three-ways (5-2-2) with Tenreyro and Dhingra voting for no change.
“Whilst we believe that the current economic outlook combined with wage growth sustaining the elevated inflationary picture justifies a 50bp rise this time around, we think there is cause for optimism that we are approaching the peak with one further 25bp hike to come this spring.
“The BoE has been clear that they will maintain rates in order to control inflation and in the event of a mild recession we see no immediate move to reduce rates this year. Whilst markets are pricing in cuts before the end of 2023, we don’t see any appetite to move lower until 2024.”