BoE: 80% priced for a 25bps rate hike today – Rabobank

According to Jane Foley, Senior FX Strategist at Rabobank, September marked a sea-change in expectations regarding BoE policy as currently the market is around 80% priced for a 25bps rate hike on November 2 and the latest Bloomberg survey suggests that more than three quarters of analysts now expect the BoE to raise rates at its November meeting, up from around one in five in September. 

Key Quotes

“This sharp swing in expectations is almost entirely the result of the step up in hawkish rhetoric proffered by the MPC rather than a response to UK economic data.  Indeed, while UK CPI inflation has edged up to 3%, activity series are showing signs of weakening.  The implication is that for many forecasters, the expectations of a rate rise on November 2 is not necessarily consistent with what they think the Bank should do, but rather what the MPC now looks likely to do.”

“To protect its credibility, we do now expect that the Bank will hike rates in November.  However, due to weakness in recent economic data, we anticipate that the Bank will not be able to follow on with another move for some time.  The dovish hike scenario suggests that upside potential for the pound on a policy move in November is likely to be limited.”  

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.