BoE Bank Governor Gives Latest Indications, BoE's Latest Tone Seen Starting to Change!


 Bank of England Governor Andrew Bailey said on Wednesday that the central bank may have already ended its rate hike cycle, although it was too early to be sure of the future path of policy.

The BoE raised interest rates to 4% last month but signaled it is close to ending the hike that began in December 2021, as some of the inflationary pressures in Britain's economy show signs of easing.

"At this stage, I would be careful not to suggest that we are done with raising the Bank Rate, or that we need to do more," Bailey said in a speech at an event organized by public relations firm Brunswick.

"Some further increases in Bank Rate may turn out to be appropriate, but nothing has been decided," added Bailey.

Following Bailey's remarks, financial markets slightly reduced bets on a possible quarter-point rate hike on March 23 after the BoE's next Monetary Policy Committee meeting, and now see a 5% chance that the BoE will keep rates on hold.

However, the market still sees a roughly 70% chance that rates will peak at 4.75% in the second half of the year.

Sterling weakened against the euro and two-year British government bond yields fell around 7 basis points from levels before Bailey's speech.

"It is clear from Mr Bailey's speech that the Committee is putting more emphasis on the major tightening that has been delivered and wants to get it done as quickly as possible," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Bailey said that the economy has grown largely as expected since the BoE raised rates on February 2.

Bailey also highlighted how the central bank shifted its language in February, when it said further tightening would be needed if there was evidence of more sustained inflationary pressures.

A member of the BoE's Monetary Policy Committee, Catherine Mann, said last week that it was too early to say that the risks posed by last year's surge in inflation had abated and that the central bank should continue to raise borrowing costs.

But two MPC members – Swati Dhingra and Silvana Tenreyro – voted in February to stop the rate hike.