Why didn’t the BoE go further and what next?

In some ways, given its concerns about the weakening in the real economy, the Bank of England's decision not to follow the Fed and raise rates by more than 25 basis points makes sense. But with more persistent underlying price pressures likely to keep core inflation in the UK above the rate in the US until mid-2023 and growing evidence that firms' price and wage expectations have become dislodged from the 2.0% target, we wouldn’t rule out the Bank raising rates by 50bps at future meetings. Either way, we still think rates will need to rise to 3.00%, rather than to the peak of 2.00% expected by the consensus. Markets Drop-In (22^nd June, 10:00 ET/15:00 BST): Join our Markets team for this special briefing on the outlook for equities, bonds and FX and a discussion about revisions to our forecasts. Register now