We have long argued that investors have been too sanguine about the prospect of a hike in Bank Rate in the near term. But the hawkish tone of the minutes of the MPC’s September meeting surprised even us. Indeed, the revelation that “a majority” of MPC members would vote for “some withdrawal of monetary stimulus…over the coming months” if the economy continues to hold up put a November hike firmly on the table. We had previously thought May next year most likely. In contrast to previous guidance, it seems that the MPC would now be content to hike before seeing evidence of an acceleration in domestically-generated inflation, and in particular wage growth, as long as it feels that a pick-up is likely ahead. As a result, we now expect the MPC to deliver a 25bp hike alongside the November Inflation Report.
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