BoE decides after another bad inflation report

Published Thu, Jun 22 2023 - 8:22 am

The Bank of England meets after another shocker inflation report, and is broadly expected to hike the rates by another 25bp points.  

The BoE is the first major central bank that started hiking the rates to fight inflation. It proved to be the least efficient bank doing this job; British inflation is the worst among developed economies at nearly 9%. Consequently, the BoE will certainly be the last to finish hiking.

The bank is expected to hike six more times, by 25bp, to reach a peak rate above the 6% by the end of this year, or the beginning of the next.  

And I don’t see how the UK will avoid recession in this morose macroeconomic setting.  

The British pound didn’t find an army of buyers after the UK inflation report yesterday. After an initial attack on the 1.28 resistance, Cable came back to pre-data levels and even traded at five-session lows.

The EUR/GBP made a sharp U-turn from a nearly oversold market and jumped above 0.86. There is room for a hawkish surprise from the BoE (a 50 basis points hike?), and if not today, in one of the next meetings. The latter should keep Cable on path for more gains, in the actual environment of softening US dollar.

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