Potential for BoE rate increases in 2022 suggests GBP outperformance – CIBC
Sterling outperformance is expected as 2022 rate hike expectations are set to grow amidst expected recovery in the UK labour market, economists at CIBC Capital Markets report.
Two UK rate hikes in 2022
“The performance of the labour market remains a major BoE policy wild card. Should the labour market prove able to absorb workers coming off the jobs support scheme, helped by the more than 1m in current job vacancies, we can expect the increasingly hawkish BoE to underline the prospect of two UK rate hikes in 2022.”
“We assume a 15bp rate hike in February, reversing the emergency cut from March 2020. Absent a labour market breakdown, we expect the bank to look to hike again in H2 2022, most likely August.”
“BoE activism in the face of above trend growth and inflation contrasts with the central bank laggards. That suggests sterling will perform well against the EUR, JPY and CHF.”
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FXStreet Insights Team
FXStreet
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