Commenting on The Bank of England (BOE) interest rate rise, Melanie Baker, Senior Economist at Royal London Asset Management said:
“The Bank of England’s MPC continues to signal a meeting-by-meeting data dependent approach to policy setting. According to the minutes of today’s meeting, if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.
“A number of things sound like they have played into their decision to hike rates today, including the recent Budget and a more optimistic near-term picture for the economy, as well as the recent upside surprise in headline inflation and a still tight labour market.
“Despite today’s rate hike, their commentary around inflation was somewhat dovish. That included noting that services inflation was broadly in line with their expectations – in relation to the recent upside surprise in inflation, most of the surprising strength in the core goods component was accounted for by higher clothing and footwear prices, which tend to be volatile and could therefore prove less persistent.
“For now, I am sticking to my forecast of one more 25bp rate hike from the BoE. However, I see risks to that forecast on the upside as well as on the downside given still-strong domestically-driven inflation.”
The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.