Sterling Stabilizes as Traders Assess BoE Rate Outlook
Sterling stabilized above $1.325, recovering from recent three-month lows as investors digested remarks from Bank of England policymakers and awaited US inflation data for further clues on the Federal Reserve’s rate path. BoE Chief Economist Huw Pill, one of the bank’s most hawkish policymakers, expressed skepticism about market expectations for four rate hikes over the coming year. While arguing that the BoE should have acted sooner to address the energy shock triggered by the Iran war, he said stronger evidence was needed to justify a larger rate increase. Governor Andrew Bailey, meanwhile, warned that a rate hike would become increasingly difficult to avoid the longer the energy shock persists. Markets are pricing in a near-100% chance of the MPC delivering its first rate hike in more than three years at its November meeting. Traders had also fully priced in four 25-basis-point increases by June 2027, but have since slightly scaled back their expectations.
325, recovering from recent three-month lows as investors digested remarks from Bank of England policymakers and awaited US inflation data for further clues on the Federal Reserve’s rate path. BoE Chief Economist Huw Pill, one of the bank’s most hawkish policymakers, expressed skepticism about market expectations for four rate hikes over the coming year. While arguing that the BoE should have acted sooner to address the energy shock triggered by the Iran war, he said stronger evidence was needed to justify a larger rate increase. Governor Andrew Bailey, meanwhile, warned that a rate hike would become increasingly difficult to avoid the longer the energy shock persists.
Markets are pricing in a near-100% chance of the MPC delivering its first rate hike in more than three years at its November meeting. Traders had also fully priced in four 25-basis-point increases by June 2027, but have since slightly scaled back their expectations.