BOE Could Hike in November to Ward Off Energy Price Jitters

Dow Jones
Sep 22

1116 GMT - There were signs at the Bank of England's meeting last week that policymakers' patience around the energy-price shock is wearing thin, Deutsche Bank economists Sanjay Raja and Maui Brennan say in a note. Following the BOE's decision to hold, Deutsche revised its expectation to two quarter-point hikes in November and February, changing its call from no hikes previously. While there wasn't a fundamental shift in rate-setters' thinking, continued high inflation increases the likelihood second-round effects build, the Deutsche economists say. "Put simply, we think the monetary-policy committee may embark on a modest tightening cycle as an insurance policy against second-round effects." However, should energy prices rapidly lower in the coming weeks, the case for hikes may start to weaken, they add.

 

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