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2026-11-05 17:50:27
[Institutions: Bank of England Expected to Resume Rate Hikes, Sterling Upside Limited] ⑴ Francesco Pesole of ING Group stated that he expects the Bank of England to raise interest rates by 25 basis points to 4.0% on Thursday, in line with market expectations and consensus. ⑵ The probability of a roughly 25% increase in household energy bills in January has risen, and overall inflation is expected to peak at slightly above 4% early next year, which is often considered the Bank of England's pain point threshold. ⑶ However, evidence of a second round of inflation remains limited. ⑷ The institution expects a 7-2 vote in favor of the rate hike and believes the Bank of England will not commit to further tightening at this stage. ⑸ A rate hike in February remains the baseline scenario, but policymakers should continue to emphasize the actual evidence of energy transmission to wages and prices. ⑹ A clear signal of further rate hikes would constitute a hawkish surprise. ⑺ The institution believes that Thursday's rate hike could validate the recent rally in sterling in the short term. ⑻ However, a February rate hike has already been fully priced in, and the threshold for a hawkish surprise to boost sterling seems quite high. ⑼ The euro is suppressed by French factors and has no immediate rebound potential against the pound. (10) The pound faces a less favorable short-term interest rate differential against the dollar, as the pound's yield curve exhibits greater dovish elasticity when oil prices fall. (11) The institution currently expects the euro to stabilize around 0.8400 against the pound, with the near-term upside for the pound against the dollar likely limited to 1.3500. (12) Overall, expectations of a Bank of England rate hike have been fully priced in, and further strengthening of the pound faces constraints.
