BoE: The hiking cycle could be ending soon – UOB

Economist at UOB Group Lee Sue Ann suggests the BoE could be approaching the end of its tightening cycle with the expected 25 bps rate hike later on Thursday.

Key Takeaways

“Headline CPI unexpectedly jumped in Feb, to 10.4% y/y, the first increase in four months, after a 10.1% y/y gain in Jan. On a monthly basis, headline CPI was up 1.1%, exceeding a forecast of 0.6%, and against the fall of 0.6% in Jan. Core inflation rose to 6.2% y/y from 5.8% y/y in Jan.”

“Prior to the release of Feb’s CPI readings, we had argued that the upcoming Bank of England (BOE) decision for Mar was a close call. With this latest inflation snapshot and ongoing worries about a tight labour market, we think the banking turmoil will likely be more of a background concern for the BOE, tipping the balance in favour of a rate hike.”

“We are thus looking for a 25bps rate hike when the BOE announces its latest monetary policy decision at 8pm SGT later this evening (23 Mar). The minutes of the meeting will be published alongside the decision. This, however, could be the final hike of the current tightening cycle. We bear in mind that the rise in interest rates is taking place against a backdrop of difficult economic conditions in the UK.”