(Kitco News) - The Bank of England raised rates by 25 bps today as expected. Prior to the meeting, it was expected that up to three members could vote for a larger hike.
MPC Members Haskel, Mann, And Saunders voted for a 50 Bps hike and 6 BoE policymakers voted for a 25 Bps hike.
In May the Monetary Policy Committee voted 6-3 to lift rates to 1.0%, with the three dissenters preferring to raise by 50bps.
Prior to the event, Deutsche Bank’s Sanjay Raja predicted the June decision to remain split too. “We see at least three members voting for a 50bp move. Big picture, we expect the MPC to take a slightly more hawkish slant relative to May, with fiscal policy weighing on recession risks, inflation risks widening, and the labor market remaining way too hot.”
The bank also said CPI inflation is expected to be over 9% during the next few months and to rise to slightly above 11% in October.
On inflation, the BoE said “additional large increase” in OFGEM price cap + signs that prices are rising “across the major components of consumer prices” for the new 11% forecast. Translation: high inflation is everywhere.
Looking at the 30-min reaction of GBP/USD the bulls could have been looking for more from the BoE. The price looks to be heading to the 1.20 area. Futures markets are now pricing in rates at 2.75-3% by the end of 2022 and this is slightly lower than before the decision.
