Commentary: Bank of England’s interest rate announcement

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

“This is the tenth consecutive rise by the Bank of England. But the most notable takeaway is that they have continued with a 50bps increase, whereas the US Federal Reserve last night slowed to a 25bps increase. This reflects the relative aggressiveness of their policies during 2022. As a consequence the BoE was left with more work to do this year. That being said, they will probably feel that following this afternoon, they are nearing the end of this tightening cycle – most expect an additional 25-50bps of increases over the next few months, before a pause.

“Recent falls in wholesale energy prices should ensure that the peak in inflation has passed, although this will take a while for it to be felt by consumers. For the BoE, although lower gas prices will be welcomed, their attention will be more focused on the labour market, which remains tight. This can drive higher wage growth which, in turn, can ultimately cause elevated inflation to persist.

“Investors should take comfort from the upgrade to the BoE’s growth forecast although it is still expected to be one of the worst economic performers of the developed nations this year. Although the implications of this will touch a number of asset classes, one thing Advisers should be considering above others is the investment case for a global bond exposure rather than a UK bias.”