BoE policy rate: market pricing - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the BoE has kept the base rate unchanged at 0.5% since 2009.

Key Quotes

“Improvements in the economy, plus indications of inflationary pressures, albeit patchy, saw the BoE in 2015 signal it will eventually raise the base rate. But a soft patch over the past year, particularly for wage inflation, plus Brexit risks, have caused the market to swing from pricing in hikes to pricing in a 60% chance of a cut.

Currently, markets assign only around a 25% chance of a cut, and we would expect that to disappear post referendum. A rate hike could come as early as Q4 2016, but we do have pencilled in Q1 2017.”