Predictions ahead of BoE interest rate decision, Canada Life Asset Management

by Meg Bratley

Steve Matthews, Liquidity Fund Manager, Canada Life Asset Management, comments ahead of the Bank of England Interest rate decision:

“Following market turmoil in the wake of the SVB failure and Credit Suisse woes, markets have reined in previous hike expectations and are currently pricing a 44% chance of a 25bp rise in the meeting this week.

 “This reflects the crossroads the Bank of England (BoE) finds itself at following recent events and data; The UK economy narrowly avoided negative GDP growth in Q4 and Jeremy Hunt predicted last week that the UK will avoid a technical recession in 2023. Wage growth remains high but is slowing, whilst the latest labour market report showed continued tightness.  This week’s BoE survey shows inflation expectations coming down, but it remains stubbornly high so far.

“On balance, we expect the BoE to raise its Base Rate by 25bp on Thursday to take it to 4.25% and to signal a pause in its hiking cycle, ultimately peaking at 4.25%. Future decisions will be data dependent, but we don’t expect any loosening until 2024.”

 

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