Bank of England likely to hike interest rates by 25bps to 4.75%

June 21, 2023 (MLN): Bank of England (BoE) will likely hike interest rates by 25bps to 4.75% tomorrow, to get a handle on inflationary pressures plaguing the economy.

Markets shifted today as the latest UK inflation data showed inflation remained higher than expected for a fourth month.

The Consumer Prices Index (CPI) rose by 8.7% in the 12 months to May 2023, unchanged from April but down from a recent peak of 11.1% in October 2022.

The monthly rate in May 2023 was 0.6%, the same as in May last year.

Traders are now betting that the Bank of England might have to accelerate the pace of interest-rate hikes, with some market experts even leaning towards a 50bps hike.

Charles White Thomson, CEO at Saxo Capital Markets UK said “Inflation is an elusive, wily, and powerful foe especially when it builds up momentum, as it is now. There is a strong argument for a 50-basis point hike at tomorrow’s Bank of England’s meeting,” as Bloomberg reported.

“The Bank needs to take the initiative quickly. The risk for further policy failure is real and the stakes are getting increasingly high,” he added.

Traders also lifted expectations for the terminal rate to 6%, which would be the highest since the turn of the century.

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