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FTSE 100 live: London shares tumble as City awaits Bank of England hike

Published Jun 22, 2023 11:30
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© Reuters FTSE 100 live: London shares tumble as City awaits Bank of England hike
 
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Proactive Investors -

Prominent diarists have their say on the BoE decision

Inspired by a tweet, we have asked ChatGPT to preview the Monetary Policy Committee decision.

In the style of Bridge Jones's Diary:

Dear Diary,

Crikey! The Bank of England's interest rate decision is today. With inflation stubbornly high and wage growth a bother, the tension's more palpable than an awkward dinner with Mum. Everyone's betting on a rise from 4.5% to 5.0%. Haven't seen rates that high since 2008, a proper blast from the past! As for the market, well, they're hoping for a 6% peak by winter - all a bit too "Big Coat" for my liking. If they're wrong, though, expect a strop worse than Darcy refusing to wear his Christmas jumper. Here goes!

Love, Bridget

BoE hike odds shorten

Looking over to Threadneedle Street, markets are now pricing in close to a 50% chance that Bank of England rates will go up to 5% today, rather than the smaller 25bps increase to 4.75%.

A smaller hike is still seen as the favourite.

Most economists are predicting a 25bps raise.

After the strong inflation data and wage growth figures, Julien Lafargue, chief market strategist at Barclays (LON:BARC) Private Bank, said: “While a 50bp hike today, as partly priced in, cannot entirely be ruled out, the BoE may prefer to hike by 25bp and follow up with a very hawkish message.

“At this point, the BoE is likely to move the bank rate to 5.5% at a minimum and may need to opt for another 25bp hike should core inflation remain stubbornly high in the coming months.

“At the same time, higher mortgage rates are already significant headwinds for UK consumers and the refinancing wave that is to come will only add to the ongoing cost of living crisis. As a result, UK rates are likely to remain volatile in the short term.”

The Footsie meanwhile continues to hover in the doldrums, 61 points below the waterline.

First rate hike of the day

Norway’s central bank has hiked rates by 50 basis points, more than the 25bp that was expected, potentially paving the way for the Bank of England to follow suit.

"What really stands out is the new interest rate projection, which is the output of Norges Bank’s model and shows where policymakers expect rates to go over the coming months," said economists at ING.

Back in March, forecasts pointed to a peak rate of 3.5%, which implied the bank would have hiked by 25bp this month before pausing.

Shares fighting back but still on the back foot

London's blue chips are fighting back from earlier lows, with most shares paring losses.

Helping things, Ocado is topping the leaderboard with a rise of over 30%.

The FTSE fell below 7460 earlier but is now back up to 7500, though that is still a fall of 60 points on the day.

Read more on Proactive Investors UK

Disclaimer

FTSE 100 live: London shares tumble as City awaits Bank of England hike
 

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