The surprise hike in interest rates by the Bank of England today, from 0.10% to 0.25%, could just be a case of the Bank moving a bit quicker than expected, but the hawkish tone of the commentary suggests to us that it is now also willing to move a bit further than expected. As such, we now think that interest rates will rise to 0.75% by the end of next year (up from 0.50% previously), but we’ve kept our end-2023 forecast at 1.00%. That forecast envisages fewer hikes than is priced into the markets.
Note: Central Bank Drop-In – The Fed, ECB and BoE are just some of the key central bank decisions expected in this packed week of meetings. Neil Shearing and a special panel of our chief economists will sift through the outcomes on Thursday, 16th December at 11:00 ET/16:00 GMT and discuss the monetary policy outlook for 2022.
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