Pensions - Articles - Comment on expected Bank of England interest rate rise


Commenting on the expected Bank of England interest rate rise, Chris Arcari, Head of Capital Markets, Hymans Robertson, said

 Despite Bank of England Governor Andrew Bailey’s recent comments that further interest rate rises may not be required, markets fully expect the Bank of England to raise the bank rate from 5.25% p.a. to 5.5% p.a. at the September Monetary Policy Committee meeting and are split on whether interest rates are raised again, to a peak of 5.75% p.a., in this rate-hike cycle in early 2024 (i.e. are expecting one further 0.25% p.a. increase after the September meeting).*

 “Given falls in energy prices between July and August in 2022, and rises between the same months this year, year-on-year headline inflation was expected to re-accelerate in August given a smaller downwards impact from energy prices. However, we do not expect this will be particularly influential on the outcome of the September meeting.
 
 “Year-on-year core and services CPI inflation running at 6.9% and 7.4%, respectively, in July, and regular wage growth remaining at a record pace of 7.8% year-on-year in the 3 months to end-July, will be of more concern to the BoE and gives the MPC ample justification to continue raising interest rates in the face of genuine signs of domestically-driven inflation pressures.
 
 “Despite further actual, and expected, increases in the BoE base rate, expectations of where interest rates ultimately peak in this cycle have fallen in recent months following July’s downside surprise in headline and core inflation. This has provided a little relief to the mortgage market, as fixed-term mortgages are determined by 2- and 5-year swap rates, or interest rate expectations, rather than the base rate.”
 
 *UK instantaneous overnight index-swap forward curve, 14 September 2023
  

Back to Index


Similar News to this Story

FCA on connecting consumers products and growth
At a time when increasing pensions contributions substantially is out of the question or insufficient for many, we must focus instead on how to improv
AI is changing pensions admin but still has a long way to go
Trafalgar House has announced the first results of their 2025 Trust & Confidence Index showing that whilst AI is beginning to play an important role i
4 key findings about the state pension ahead of the increase
Ahead of the 4.1% increase to the state pension (from 6th April), Phoenix Insights shares its four key findings about the state pension.

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.