Technical Analysis

ICYMI: Bank of England jacked rates 75bp higher, biggest in >30 yrs, & were, errr, dovish

When the FOMC jammed its rate 75bp higher on Wednesday the market response was ‘dovish’. Chair Powell scuttled that with his hawkish comments soon after.

On Thursday the Bank of England hiked the same, by 75bp. Then Bank of England Governor Bailey dropped dovish remarks at his presser.

Confused? Maybe its all part of a plan:

In summary, the BoE overnight:

  • raised its cash rate by 75bps, to 3%, as expected
  • the vote was 7-2 in favour of +75
    • Dhingra dissented, wanting +50bp
    • Tenreyro was further away, wanting +25
  • economic forecasts included a 3% contraction in GDP, CPI inflation but as high as 10.9% on the way

Governor Bailey press conference watered down his previously hawkish message:

  • We think the bank rate will have to go up less than what’s currently priced in financial markets
  • but he did caveat this by saying risks to inflation were to the upside

GBP fell:

The next Bank of England meeting is on Thursday 15 December. As I update pricing is circa:

  • 50% for 75bps
  • cash rate to top at around 4.75% in 2023

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