The consensus is that the BOE will increase by 75bps. Many analysts are taking a cautious approach due to recent market events. The vote is a key factor, as it has more impact on the markets than the result. The market will price in the BOE’s actions if there is a solid expectation.
The BOE is in a bit of a tight spot, which makes figuring out exactly what they’ll do a little harder. The last month of unexpected events from the government put a strain on the markets, and they haven’t fully returned to normal. The confirmation of Jeremy Hunt and Sunak’s election as PM will likely make the board members more at ease. Both politicians are technocrats and have a common view of the economy with the BOE and the City.
It’s not smooth sailing, though
The September mini-budget scandal revealed a weakness in the UK’s financial system and in global financial markets: a lack of liquidity. Investors are reluctant to make long-term investments due to economic uncertainty, even as interest rates rise. The inflation rate is still high.