Hike rates

Bank of England needs to raise rates next week to calm markets, Deutsche Bank analyst says

A general view of the Bank of England (BoE) building, the BoE has confirmed it will raise interest rates to 1.75%, in London, Britain August 4, 2022. REUTERS/Maja Smiejkowska

Join now for FREE unlimited access to Reuters.com

LONDON, Sept 23 (Reuters) – Britain’s central bank must raise interest rates significantly between meetings as early as next week to calm markets and restore credibility, a Deutsche Bank analyst said on Friday.

UK bond yields rose the most in a single day in more than three decades on Friday and the pound slid 3% to a new 37-year low after UK Finance Minister Kwasi Kwarteng presented a series of major tax cuts to be financed by public borrowing.

In a research note, Deutsche Bank’s George Saravelos said the policy response required was clear: “A significant Bank of England inter-meeting rate hike as early as next week to regain credibility with the market.” .

A BoE decision to cancel its planned sale of UK government bonds would make matters worse, he said.

He added that a strong signal from the BoE that it was ready to do “whatever it takes” to bring inflation down quickly and move real yields into positive territory would help.

Join now for FREE unlimited access to Reuters.com

Reporting by Dhara Ranasinghe Editing by Tommy Reggiori Wilkes

Our standards: The Thomson Reuters Trust Principles.