Bank of England set to raise interest rates by another 25 basis points

Even though inflation has softened from the double-digit figures, the United Kingdom’s consumer price inflation remains one of the highest among major advanced economies. Therefore, the main focus will remain on the language in the Bank of England’s monetary policy statement for fresh cues on its rate hike outlook, in the absence of Governor Andrew Bailey’s press conference and updated economic projections. GBP/USD is consolidating the recovery gains below 1.

Markets trade with caution early Thursday amid expectations of further central banks’ tightening. US S&P 500 futures are marginally lower while the benchmark 10-year US Treasury bond yields trade close to weekly troughs near 3.70% “The dilemma facing the BoE is whether to extend the tightening cycle by a few months or step up the pace again to reach a higher peak sooner. Both scenarios risk causing havoc in the housing market,” Societe Generale added.The BoE is expected to raise the key rates by 25 basis points from 4.50% to a 15-year high of 4.75% on Thursday, June 22. The interest rate decision will be announced at 11:00 GMT, accompanied by the Minutes of the meeting.

The numbers caused markets to ramp up their bets on BoE rate hikes, driving two-year government bond yields to their highest since 2008. Markets ramped up their expectations for the peak in BoE rates to as high as 6.0% by early 2024.

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