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

TPR extends its oversight to professional trustee firms
A framework for oversight of professional trustees (PTs) will be introduced by The Pensions Regulator (TPR) to protect savers. The PT market has exper
Facilitating DC pension fund investment into private capital
Leaders from the pensions and private capital industries have issued new recommendations on how to facilitate UK DC pensions to invest in private capi
Government plan to allow extraction of cash from pensions
Members of defined benefit (DB) pension schemes fear that Government plans to allow employers to “extract” cash from their schemes put their retiremen

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.