BoE's Ramsden warns persistent elevated energy prices could warrant a rate hike
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BoE Deputy Governor Ramsden maintained a cautious stance on monetary policy, saying he does not foresee the need for further quantitative easing anytime soon while stressing that the inflation outlook has tilted more to the upside. As a reminder, the BoE held the Bank Rate at 3.7
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4 itemsBank of England some way off a rate hike despite energy price spike
The desk interprets the Bank of England's position to keep rates on hold, despite rising energy prices, as a signal of a cautious approach to monetary policy. Per the full note from ING, the BoE is unlikely to hike rates at the upcoming meeting on July 30, with expectations of inflation peaking at around 3% later this year, which remains well below their 4% trigger level for significant second-round effects. Although recent energy market surges pose a challenge, they are not considered sufficient to warrant an immediate rate adjustment, likely preserving the current rate environment and keeping traders on alert. With no high-impact events slated on the economic calendar in the next few weeks, the potential for a change in sentiment seems limited at this time.
Bank of England poised for July rate hike on energy spike
The desk anticipates that surging energy prices will compel the Bank of England (BoE) to raise rates in July, particularly in light of projections pointing to substantial increases in oil and natural gas costs. Per the full note from ing-think, a significant spike in these prices will challenge the BoE's current stance, which appears to lean towards maintaining rates amid benign inflation. The latest projections suggest oil could hit $120 per barrel and natural gas could reach €70 per MWh, elevating the Bank’s inflation scenario into a more alarmist 'scenario C' territory, thus pushing the rate hike narrative. This backdrop, combined with upcoming increases in household energy bills slated for July, brings rate hikes firmly back to the forefront of market expectations.
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