BoE more optimistic on the economy after raising rates by 0.25%

The Bank of England hiked interest rates by another 25 basis points today, taking the base rate to 4.5% while making significant tweaks to their economic forecasts. The MPC is now of the belief that the economy will avoid recession this year and significantly revised up its GDP forecast, albeit to mild growth.

What’s more, its forecast for inflation was also much higher which may indicate it will have to go further and hold for longer in order to get back to target. That said, markets are pricing in one or two more hikes before the end of the tightening cycle before reversing course next year.

All things considered though, the situation has changed significantly over the last three months and I expect it will again over the next three, meaning the projections in August could look very different. Between the economic data and further developments in the banking system, most notably in the US, we’re going to learn a lot over the next few months at which point we may have a much clearer view on the overall outlook.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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