The Bank of England stated that the case to tighten UK monetary policy is growing, and inflation might top 4%, prompting investors to bring forward bets on an interest-rate increase.
- As the BOE retained its ultra-loose monetary policy settings in place, officials changed the tone on the outlook, and Deputy Governor Dave Ramsden joined Michael Saunders in calling for an end to bond purchases.
- In a statement, the Monetary Policy Committee stated that noting the “modest tightening” in policy foreseen over their horizon in August, “some developments during the intervening period appear to have strengthened that case, although considerable uncertainties remain.”
- Financial markets upgraded bets for an interest rate rose to February while the pound strengthened as investors reacted to a decision that puts the BOE in a more difficult situation of advanced-world central banks in a critical week.
- On Wednesday, the US Fed announced that officials might taper bond-buying in the coming months, and Norway announced an interest rate hike on Thursday.
The UK Central Bank is attempting to curb inflation that accelerated well above its forecasts over the summer, reaching 3.2% last month. BOE’s new focus is enabled by improved jobs data that show unemployment will peal below its worst-case scenario.
FTSE 350 down -0.011%, GBP USD up +0.81%Source: Bank of England.