BOE: Rate hike expected in November, scope for two more next year – Standard Chartered

Governor Andrew Bailey’s comments over the weekend made clear that a hike to Bank Rate is coming soon. Subsequently, economists at Standard Chartered expect a 15bps hike in November. They also see two further 25bps hikes in February and May, taking base rate to 0.75% by end-2022.

Hawks speak loudest

“We bring forward our expectation of a 15bps rate hike to 4 November (from February 2022 prior), taking the base rate to 0.25% by end-2021 (0.10% previously).”

“We do think there is now scope for two more 25bps rate hikes next year (likely in February and May), taking the base rate to 0.75% by end2022 (0.50% previously); but this is still well below what the market is pricing in (base rate at 1.25% by end-2022.” 

“Despite inflation likely exceeding 4% by year-end, we think the BoE will be constrained from moving further or faster than our forecasts. The two metrics the MPC will be following closely remain underlying wage growth and inflation expectations – these will provide the strongest indication of any adjustment in thinking.”