Ben Kumar, Senior Investment Strategist at 7IM:
“Despite no movement on interest rates today, all signs point towards a rate hike on the horizon as the BoE starts to consider options to get inflation under control. We have seen temporary inflation increases beyond expectations in the UK, which is likely to have moved the timeframe for rate rises forward. As we’ve been saying for a year or so, investors should be preparing for a decade in which inflation is more of a challenge to their portfolios.
“We believe that investors should look to the higher yielding areas of fixed income and towards alternatives. As interest rates grind up government bonds will still protect portfolios but they still aren’t going to generate much in the way of returns. Investors should be looking for opportunities now that are designed to do well in rising-rate environment, even if the prospect of rate rises is far in the future as it is only a matter of when, not if. Being positioned to be underweight in government bonds, overweight in alternatives, overweight in value and underweight in tech are good examples of what investors can do to start preparing for rising interest rates.”
Chris Beauchamp, Chief Market Analyst at IG Group:
“The doves have won again at Threadneedle Street, and Andrew Bailey finds himself being cast in the Mark Carney ‘unreliable boyfriend’ role, as the Bank of England avoids raising rates this time.
“The statement does its best to swerve the view that the bank has been caught saying one thing and doing another, arguing that rates will have to rise in coming months, but the 7-2 vote suggests it might take a while to shift the balance of opinion on the MPC. This will be welcome news for homeowners, but markets will wonder if the Bank of England has the necessary steel in the months to come to contemplate the needed rise in interest rates.”
Luke Bartholomew, Senior Economist at abrdn:
“The decision to keep rates on hold today will certainly surprise some investors as the Bank has done little to push back on mounting speculation about an imminent hike. We expect a hike in rates to come through in December, when policy makers will have at least some tentative evidence on how employment has performed after the expiration of furlough. And indeed further rate increases next year. So the message to investors is that rate hikes are coming soon, but not to hang too closely to every speech and interview by rate setters.”
