Ahead of Thursday’s Bank of England rate decision, Canada Life Asset Management’s Steve Matthews expects the BoE to raise its base rate by 50bps to 5.50%.
Steve Matthews, Fund Manager, Liquidity, Canada Life Asset Management, said: “Whilst the Fed and ECB are showing signs that their hiking cycles are close to complete, the picture is far from clear in the UK.
“The decision to hike by 50bps last time around, was based on the stubborn inflation numbers fuelled by wage inflation and suggested that the Bank of England believed greater momentum is required to bring inflation under control.
“It is unlikely that there has been enough time for the last hike to have had a lasting impact and the BoE, wary of being out of sync with the US and Europe, will want to front-load their remaining moves for the greatest impact. With the resident dove, Silvana Tenreyro, leaving the committee there will be a more hawkish tone to the meeting and this could be the deciding factor in what will likely be a split vote.
“Markets have come down a long way from their peak hike expectations but are still pricing in a further three hikes before the end of the year. On balance we agree with this and expect a close call to raise the Base Rate by 50bps and see a September peak of 5.75%.”
