Commenting on today’s announcement from the Bank of England, Melanie Baker, Senior Economist at Royal London Asset Management said:
“Three Monetary Policy Committee (MPC) members voted for a 50bp rate rise and most members judge that some further tightening in policy “might still be appropriate”, but the Bank are effectively signalling that they aren’t expecting rates to rise much further.
“The Bank’s forecasts continue to signal that the MPC see too many rate increases priced into markets. Inflation is well below target, three years ahead on the version of their forecast profile that builds in market expectations for interest rates. Some MPC members thought that guidance around further rate rises wasn’t appropriate either.
“Some measures of inflation expectations remain elevated; inflation is high and set to rise quite a bit further; and the unemployment rate is low. Despite households facing such large cost-of-living challenges, with interest rate increases adding to that, and the outlook for real activity having deteriorated, it still makes sense therefore to think that we haven’t yet seen the last interest rate hike from the Bank.”
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.