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BoE hike 50bp with a dovish message, which doesn't mean they won't hike again

3rd February 2023

Commenting on The Bank of England (BoE) interest rate rise, Melanie Baker, Senior Economist at Royal London Asset Management said:

“It sounds like the Monetary Policy Committee think this might be the peak for rates, but with enough emphasis on upside risks to inflation to support more hawkish views too.

“The forward signalling has changed again – in a more dovish direction. This time, importantly, they drop the reference to “future increases in Bank Rate may be required”. They also no longer refer to potential ‘forceful’ rate hikes.

“I am not convinced that the BoE are on hold for a considerable period and on the brink of a pivot. The outlook is very uncertain and, importantly, they still see the skew of risk to their inflation forecasts as very much to the upside. I continue to see downside risk to my forecast peak for UK interest rates at 4.5%. It seems very plausible that they will now pause for at least a meeting or two. However, I’m inclined to keep pencilling in another 50bp of hikes while domestically driven inflation pressures still look relatively strong”.


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.