BOE Summary – 20 July 2022

In his most recent speech, the President of the Bank of England stated that a rise in his benchmark interest rate by 0.50% is one of the options. He mentioned that it is not something that is set, just a possibility and open to discussion. It should be noted that many investors give a probability above 90% for a 0.50% hike.

They are also considering reducing their balance sheet by selling the bonds they hold. Possibly it will be a reduction between 50 to 100 billion, something in line with the expectations of the financial markets.

He mentioned that the Bank of England’s focus remains on inflation. Something that is being driven by various reasons, with the war in Ukraine being one of the main causes of an imbalance between supply and demand.

The latest UK inflation data shows another rise, making this 9.4%, 0.3% higher than expected, the highest in 40 years.

Rising food and fuel prices were two of the main factors in the rise in inflation. This data makes the likelihood of a rare rate rise of 0.50% to a total of 1.75% even more likely for the Bank of England.

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