Bank Of England Hikes Rates By 50Bps In Divided Decision

Economists' Views

 

James Rossiter, Head of Global Macro Strategy at TD Securities: 

 

What is clear from the MPC's Summary and Minutes today is that they remain in the dark on the direction of fiscal policy, and its impact on the economic projections. While tomorrow's mini-budget has been well-telegraphed, it will be augmented by a full budget and spending review later in the autumn.

 

Even if the MPC didn't quite get to a 75bps majority vote today, the voting pattern marked a clear hawkish shift. Notably, dovish external MPC member Tenreyro voted for a 50bps hike for the first time, and with 3 others voting for 75bps hikes, the risks are skewing in that direction for November's meeting.

 

Paul Dales, Chief UK Economist at Capital Economics: 

 

In short, the Bank has indicated it will raise rates further to offset some of the boost to demand from the government’s fiscal plans.

 

Our forecasts envisage loose fiscal policy contributing to the labour market remaining tight well into next year and some of the rise in inflation expectations proving sticky. That’s why we think the Bank has a lot more work to do yet and that the “pivot” to lower rates is a story for 2024 rather than 2023.

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