Bank of England keeps rates at 15-year high, gilts rally
© Reuters. FILE PHOTO: A pedestrian walks past the Bank of England in the City of London, Britain, September 25, 2023. REUTERS/Hollie Adams/File PhotoLONDON -The Bank of England held interest rates at a 15-year peak on Thursday, as it kept up its fight against the highest inflation among the world's big rich economies, and stressed that it did not expect to cut them any time soon.
MONEY MARKETS: Markets moved to fully price in a 25 basis point BoE rate cut by August 2024, earlier they had seen around a 80% chance."The BoE is probably along the path that it expected and probably slightly frustrated that it is not further along." "The risk the BoE is running into is that, if at the next projections there is the need to revise inflation up again, that will need to be brought together with another interest rate hike. That would kill the central bank's credibility at the cost of sterling.""With no change but close to 0.75 of cuts priced for 2024, the BoE seems keen to push back on markets getting carried away with cuts.
"They’ll likely be sitting on ‘Table Mountain’ for a while, but in our view the next move for the BoE will be to lower rates. The BoE evidently doesn’t disagree; its forecasts see inflation returning to target in 2025 if rates remain unchanged into next year and then gradually decline." "The question going forward is how long this standstill will last for – with financial markets expecting it to be a considerable period of smooth sailing. The door for future rate hikes still sits ajar, and the MPC will likely remain vigilant for further fluctuations and risks in the months ahead.""Of all the major central banks, the BoE has the toughest path forward. Economic data is cooling, the labour market is tight, but inflation is still sticky.
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Bank of England holds rates in 6-to-3 voteSteven Goldstein is based in London and responsible for MarketWatch's coverage of financial markets in Europe, with a particular focus on global macro and commodities. Previously, he was Washington bureau chief, directing MarketWatch's economic, political and regulatory coverage. Follow Steve on Twitter: MKTWgoldstein.
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