Bank of England – go big or go home

June 22, 2023 05:07 PM AEST | By Invezz

Bank of England – go big or go home — Image source: Invezz

25bp or 50bp today?

One way for the central bank to be hawkish is to surprise markets today by raising the bank rate by 50bp. This way, it signals its willingness to fight inflation no matter what, so it may regain control over the inflation narrative.

Interestingly, the British pound (GBP) was weaker following the inflation report, even if the markets have priced in a higher terminal rate. Let me restate it again – the currency weakened while markets have priced in a higher terminal rate at 6%.

Such a reaction triggers credibility concerns. On top of that, the UK net debt passed 100% of GDP for the first time since 1961.

All in all, the Bank of England is in a tough spot today. It needs to do something big to regain control over inflation and the market’s expectations – either a bigger rate hike or an extremely hawkish statement accompanying a 25bp hike.

The post Bank of England – go big or go home appeared first on Invezz.

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