Ahead of today’s BoE interest rate decision, Isabel Albarran, Investment Officer at Close Brothers Asset Management has commented.
She said: “Given the recent drop in inflation data, we expect to see a 25bps rate hike by the Bank of England today. We believe last month’s surprise double hike was likely an anomaly, an emergency response to the disorderly moves in market pricing of rates and inflation, which have to some degree normalised.
“However, at a time when the Fed have stepped back from hiking at every meeting and the ECB’s language suggests the Council is considering adopting a similar approach, the Bank of England is a hawkish outlier. When will a break be on the horizon for the UK? The BoE is clearly still concerned about changes to the UK mortgage market, and how this will affect the transmission of monetary policy, and the labour market remains tight. However, super-strong wage growth appears to be lagging falling inflation and broader employment indicators show signs of easing. We will be closely watching the announcement today for any signals that the end of the hiking cycle is near.
“For assets, confirmation that the Bank is close to the end of hiking will be a boon. We have already seen this dynamic play out in the US, where equity sector behaviour suggests investors are already looking past the peak to expected rate cuts.”
