Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Could the Bank of England really hike rates by the end of the year?

EconomyOct 11, 2021 09:51
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

By Samuel Indyk

Investing.com – Comments from Bank of England officials over the weekend have prompted money markets to price in a first interest rate hike by the Bank of England before the end of the year, a move that would have been unthinkable less than a month ago.

The CME’s BoEWatch tool is showing a greater than 47% chance of a rate hike by the end of the year, from a less than 8% chance a month ago. The tool uses MPC SONIA futures prices to gauge market expectations of the future path of Bank of England interest rates.

Bailey and Saunders comments

Over the weekend, comments from the Bank of England Governor Andrew Bailey and external Monetary Policy Committee (MPC) member Michael Saunders have added to expectations that policy might be tightened sooner than previously thought.

Speaking to the Yorkshire Post, Bailey said he was “concerned” about inflation being above the central bank’s target.

“Unfortunately, if you look at our last forecast, it [inflation] is going to go higher I am afraid,” Bailey told the regional newspaper. “As the Bank of England governor I would prefer it not be there.”

The Bank of England’s latest projections from August saw CPI inflation rising to around 4% in Q4 this year and Q1 next year but the Committee said they expected above-target inflation to be temporary and return to around the 2% target in the medium term.

Saunders was even more explicit on the need for interest rate hikes. The former Citigroup (NYSE:C) economist told the Telegraph that households should be prepared for “significantly earlier” rises in the interest rate.

Talking on rate hikes, Saunders said: “The February one is fully priced in and for December, it's half priced in. I'm not trying to give a commentary on exactly which one, but I think it is appropriate that the markets have moved to pricing a significantly earlier path of tightening than they did previously.”

It is worth noting that Saunders is one of the more hawkish members on the rate-setting MPC and voted alongside Dave Ramsden to reduce the target stock of government bond purchases at the last meeting to £840 billion.

Could the Bank of England vote to raise rates this year?

The answer to this question may become clearer by the end of the week when two more members of the MPC are scheduled to have spoken publicly.

On Wednesday, Deputy Governor Jon Cunliffe is scheduled to be speaking, however, a speech that may be of greater interest will be that of Silvana Tenreyro on Thursday. Tenreyro is one of the more dovish members of the Bank of England but if she shows any concerns over rising inflation then it may signal that the central bank is serious about hiking interest rates by the end of the year.

Data

This week, the UK’s Office for National Statistics releases labour market data on Tuesday and monthly GDP figures on Wednesday. The labour market data will be closely watched in the coming months after the end of the government’s furlough scheme in September, which could see the addition of over 1 million workers to the labour force.

“As the BoE has pointed out, the demand/supply imbalance situation in labour market is particularly uncertain at present,” said Lloyds (LON:LLOY) Bank analysts in a note. “Just how it is resolved will be an important determinant of whether wage growth is likely to accelerate sufficiently to add to concerns about inflation.”

Could the Bank of England really hike rates by the end of the year?
 

Related Articles

Dollar gains, shares rise as Omicron fears subside
Dollar gains, shares rise as Omicron fears subside By Reuters - Dec 02, 2021 2

By Herbert Lash NEW YORK (Reuters) - A gauge of global equities surged on Thursday as Wall Street rallied on hopes the Omicron COVID-19 variant will prove mild and will not halt a...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (7)
John Smith
John Smith Oct 11, 2021 13:26
Saved. See Saved Items.
This comment has already been saved in your Saved Items
High interest rates coming. Economic Armageddon, just what these people are aiming for.
Claudio Minale
Claudio Minale Oct 11, 2021 12:19
Saved. See Saved Items.
This comment has already been saved in your Saved Items
with the stagflation under way the BOE should only adjust the quantity of liquidity on the market and should not move the interest rate.
Phil Long
Phil Long Oct 11, 2021 12:11
Saved. See Saved Items.
This comment has already been saved in your Saved Items
yes , they could
Mareks Boriss
Mareks Boriss Oct 11, 2021 10:15
Saved. See Saved Items.
This comment has already been saved in your Saved Items
interest rates, inflation, jobless - "crisis" that What we can expect already this year..
David Hawley
David Hawley Oct 11, 2021 10:11
Saved. See Saved Items.
This comment has already been saved in your Saved Items
its interesting that he us warning that households must expect a significant increase in interest rates this year. but he doesn't specify which households he is trying to warn. how many poor households read this? we all know that the BOE increase rates to curb spending, but who is more likely to curb spending? unfortunately it is the poor who suffer the most as wealthier families can ride the storm. they aren't bothered who curb their spending as long as somebody does. its a pity they can't be a bit more inventive when it comes to curbing inflation
Adam Young
Adam Young Oct 11, 2021 10:06
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Cental bankers are idiots that don't know that raising rates won't work. This is aggregate supply shortages causing inflation and raising rates will not solve the problem. Energy is the key thing to watch here. Energy costs are expected to keep going high resulting in higher inflation that has nothing to do with interest rates. Look at Turkey, Venezuela and historic examples for that matter. Interest rates don't do Jack!!!
Mohamed Tagal
Mohamed Tagal Oct 11, 2021 10:02
Saved. See Saved Items.
This comment has already been saved in your Saved Items
this week trades?
Da Na
Da Na Oct 11, 2021 10:02
Saved. See Saved Items.
This comment has already been saved in your Saved Items
short the indicesshort using instruments like IGoptions us500 PUTS JUNE 2022the minute interest rate rises are announced launch a huge shortwithin months the capitulation will at least have started and you will make a lot maybe as much as 10/1
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email