In reaction to today’s Bank of England (BoE) Monetary Policy Committee (MPC) meeting, Michael Metcalfe, global head of macro strategy at State Street Global Markets; and Barry McAndrew, senior portfolio manager, active global rates at State Street Global Advisors offer their views.
Metcalfe comments, “Markets had moved quickly this year to discount more tightening from the BoE. The hawkish tilt of this meeting will at the very least, vindicate these moves and possibly encourage further expectations. What will be key now is to watch how sterling responds, as a much quicker appreciation could produce a faster fall in inflation and potentially nullify the need for a more rapid tightening cycle.”
McAndrew comments, “Today’s hawkish tilt reinforced what the market had already priced in since the last meeting. Market expectations had increased to three hikes over the next three years rather than the two guided by the BoE in November. Data has been a little brighter in places, although dampened by Brexit negotiations. The BoE is showing more confidence that a faster pace of hikes is warranted, but runs the risk that recent sterling strength accelerates. This in turn could warrant a more neutral stance by the summer than today’s guidance.”
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