Bank of England

A fervently anticipated Bank of England decision to begin lifting interest rates would be symbolic of success at steering the economy through the recent crisis, one of the BoE’s nine rate setters said this week as market speculation about a December lift-off continued.

Governor of the Bank of England Andrew Bailey said it remains vital that the Bank emphasises the significance of inflation in its policy decisions and all meetings are in-play for a rate hike.

Despite coming in for some criticism, Bank of England Governor Andrew Bailey might be pleased with his recent work: he has pushed back expectations for a rate hike to February.

The UK is now witnessing significant volatility in both interest rates and Pound exchange rates amidst uncertainty on how the Bank of England intends to exit its crisis-era settings, according to a noted economist.

"The 'unreliable boyfriend' is back," says Viraj Patel, a strategist at Vanda Research.

The Bank of England's new Chief Economist has warned inflation is set to smash their existing forecasts and that the prospect of a November interest rate rise was therefore under "live" consideration.

The British Pound is close to the previous week's highs against the Euro and Dollar with markets on Monday digesting perhaps the strongest hint yet that the Bank of England is intent on raising interest rates soon.

The Pound advanced above 1.18 against the Euro and 1.37 against the Dollar amongst a palpable improvement in global investor sentiment and despite comments from one of the Bank of England's most 'dovish' members.

The British Pound advanced against the majority of its peers at the start of the new week, fuelled by weekend comments from members of the Bank of England.

All the market really wanted to know was whether he falls into the 'hawkish' or 'dovish' camp on the Bank's Monetary Policy Committee (MPC).

The Bank of England's Governor Andrew Bailey again warns that interest rates can rise while quantitative easing is still ongoing, a message that introduces the prospect of a rate rise before the end of the year.

The British Pound rallied against the Euro and Dollar after the Bank opted to maintain interest rates and quantitative easing levels at existing settings, but warned of the prospect of elevated inflationary levels.

Goldman Sachs have pulled forward the date they anticipate the Bank of England to raise interest rates by more than a year, following this week's stronger-than-expected UK employment report.

Pound Sterling rallied following a further boost to expectations that the Bank of England would raise interest rates in the first half of 2022, although gains were soon relinquished.

Bank of England policy setter Michael Saunders has said inflation could force an interest rate rise next year, a call that comes as new data from Citi shows inflation expectations are at risk of anchoring at higher levels.

“Non-standard measures can support financial stability in the short run, but should those measures not produce the desired macroeconomic revival of growth and inflation expectations to re-steepen the yield curve, financial stability may be at risk at longer horizons,” Huw Pill.

The August monetary policy decision from the Bank of England (BoE) gave companies and households advanced notice that a normalisation of interest rates could be likely over the coming year or so, although as ever there remains a broad plurality of views among analysts and economists on the question of exactly when borrowing costs and savings returns are likely to rise.

The Bank of England is set to raise interest rates in the second or third quarters, according to the reaction of interest rate and foreign exchange markets to the August policy update.

"We see moderate upside risks to GBP if our base case is confirmed as the BoE slowly moves toward the exit" - James Rossiter at TD Securities.

The Bank of England's August 06 policy decision will be an important one for Pound Sterling and financial markets as it will likely provide a template on how it intends to whittle down its balance sheet and raise interest rates once more.