While the decisions by the Bank of England to hike interest rates from 0.25% to 0.50% and to start reversing quantitative easing (QE) were both as expected, with four MPC members wanting to raise rates to 0.75% and all members deciding to sell the Bank’s holdings of corporate bonds, it feels as though the Bank is stepping up its fight against inflation. This supports our view that rates will be raised to 1.25% this year compared to the rise to 0.75% that most economists had been expecting.
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