Commentary: Bank of England interest rate rise

Commenting on today’s interest rate rise from the Bank of England, William Marshall, Chief Investment Officer – Hymans Robertson Investment Services (HRIS) says:

“The fragility seen in the banking sector over the past couple of weeks had created some uncertainty for the BoE going into today’s meeting. However, it is now clear that yesterday’s inflation data, which showed an unexpected increase to 10.4%, has refocused the BoE’s attention on inflation. In this respect, the labour market remains the key issue for the BoE’s outlook on inflation. The latest employment data showed initial signs of an easing labour market as wage data fell. Nevertheless, it remains at near record levels of tightness, with low unemployment, meaning the risk of a cost-wage spiral is still high.

The unknown consequences of potential banking sector fragility increases the uncertainty regarding the future path of interest rates. The BoE is trying to avoid being stuck between a rock and a hard place, by continuing to focus their attention on bringing inflation down without causing additional undue stress in the banking sector. Investors should manage interest rate risk carefully during these periods of high bond price volatility.”

William Marshall, Chief Investment Officer.

Published on 13th March 2023