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Bank of England interest rate expectations (03/05/22)

by Shafiq Shabir
Head of Electronic Trading, Intertrader

A fourth rate hike is all but confirmed for May’s meeting of the Bank of England Monetary Policy Committee. But what’s splitting economists and commentators this time around is the extent to which the Bank will raise interest rates – whether by 25bp or 50bp. This could lead the Bank into somewhat uncharted waters, as the committee previously set 1% as the threshold at which it would consider commencing the sell-off of the billions of pounds of government bonds it has amassed in the last 13 years.

The hand of history will weigh heavily on ratesetters’ minds as this would be a fourth consecutive rate rise – another first in Threadneedle Street’s history books. Memories might be short but considering that February saw the first back-to-back rate hike, we have clearly come a long way since.

It’s clear the UK economy is somewhat stuck between a rock and a hard place. Recent data has given a measurably bleak outlook on both the growth and inflationary fronts, and this is only set to be amplified when April’s figures come out in a few weeks. Recent remarks from Andrew Bailey that the Bank is walking a ‘narrow path’ between growth and inflation are therefore no surprise. Traders will be eagerly listening out for any signal of the Bank’s mid-term path as the cost-of-living crisis continues to sting the British economy.

Published: 3 May 2022

You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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