Markets are pricing in nearly six additional rate increases, and while we doubt the Bank of England would agree with that, we also don't believe it will want to strongly disagree given the recent trend of inflation data exceeding expectations. Expect a 25 basis point rate increase and rather hazy predictions for the future.
According to Dales, chief UK economist, "the Bank may raise rates by 50 basis points tomorrow and will need to lift rates above 5.25% to get on top of core inflation."
Our call for tomorrow was 25 BPS but we lean significantly more in favor of 50 BPS given this horrible inflation reading.
Last Rate Decision - May 11th
(BoE Bank Rate Actual 4.5% (Forecast 4.5%, Previous 4.25%)
- BoE delivers the biggest upward revision to GDP in MPC's history.
- Inflation to fall back more slowly than seen in February.
- GDP to be 2.25% higher in 3 years than seen in February.
- New forecasts contain no negative quarters.
- BoE expects the UK economy to avoid a recession.