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Base Rate hike to ‘1.25%’ is the most likely outcome’ of Thursday’s BoE meet – Aegon AM’s Lynch

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Ahead of this week’s Bank of England(BoE)  MPC meeting, James Lynch, Fixed Income Manager at Aegon Asset Management, said:

This Thursday we have another BoE meeting where a base rate increase is expected. Another 25bp to 1.25% is the most likely outcome but the market is pricing in 35bp followed by nearly another 45bp in August.

The MPC are most likely split into 3 camps. The dovish view can be emboldened by the slowdown in GDP growth, the hawkish camp encouraged by the labour market strength/higher wages and ever rising inflation and finally, the more neutral members who are finding it all a bit confusing. Therefore, there is a strong possibility of a split vote this week – some members vote for no rise, some for 25bps and some for 50bps.

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