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| BoE Expected to Increase Interest Rates to 4.25%, Despite Market Uncertainty - Rabobank |
Bank of England (BoE) is expected to announce a 25 basis point rate increase to 4.25% next Thursday. However, analysts at Rabobank warn that such an outcome is not fully priced in the interest market. The uncertainty surrounding the collapse of SVB has raised concerns about the possibility of other financial institutions experiencing similar situations. The fear, uncertainty and doubt surrounding the market could also lead to a hold in the interest rate hike.
Rabobank analysts expect the BoE to continue with its hiking cycle at a moderate pace, raising the bank rate to 4.25%. With external members Tenreyro and Dhingra likely to vote against the rate increase, five out of seven remaining policy makers would need to vote for the hike. The potential for a three-way split in voting, with some members voting for a rate cut, is also possible.
Despite the uncertainty surrounding the market, the BoE is likely to proceed with its plans for a rate increase. However, the market's reaction to the announcement will depend on the voting outcome and any indication of a change in pace for the hiking cycle.
