Hike rates

BOE to raise rates by 50 basis points at September meeting – Goldman Sachs

Goldman Sachs economists, in their latest note, maintained the view of a 50 basis point rate hike by the Bank of England (BOE) in its September policy decision while revising their forecast upwards. an increase of 50 basis points in the coming months.

key quotes

“Looking ahead to the September meeting, the MPC is expected to focus on the extent to which strong wage growth is taking root and assessing the reaction of inflation expectations to high one-off inflation. UK labor remains remarkably strong, with many of the indicators as tight as in the US Household inflation expectations have firmed up significantly and we believe risks are skewed in favor of more persistent inflation expectations.”

“While not a done deal, we continue to believe that a 50bp hike at the September MPC meeting is more likely than a 75bp hike. That said, given persistently strong wage growth, high inflation expectations and the likelihood of the new prime minister announcing further fiscal support, there are good reasons for the BoE to quickly bring monetary policy into line. contraction territory.

“On the heels of the firmer inflation outlook, we are revising our Bank Rate forecast upwards to include 50 basis point hikes at the November and December MPC meetings (up from 25 basis points previously). ), taking the Bank Rate to 3.25% by the end of the year. After that, we expect a decline towards a 25 basis point hike in February, given that we expect to what data shows the UK economy is in the middle of a technical recession at this point.This puts our final discount rate at 3.50%, down from 2.75% previously, but below market prices. market.”