Markets expected another interest rate rise today of 50 basis points. That’s exactly what they got. This afternoon the Bank of England has announced its tenth rate rise in a row, from 3.5 per cent to 4 per cent.
The Monetary Policy Committee (MPC) voted 7-2 to raise rates to 4 per cent; two members voted to hold the bank rate at 3.5 per cent, exposing the dovish leaning that has been a feature of the MPC during the pandemic years. This created a credibility issue for the Bank, as it failed to act on inflation for so long, putting itself in a position of having to play catch-up with rates.
However, no member voted for a hike bigger than 50 basis points this time round, which suggests that sense of urgency to play catch-up has been (somewhat) lifted. The question now will be whether we get another hike to meet market expectation for one more quarter-point rate rise.
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