Bailey: 50bp Hike in Aug Likely, Pound Supported
- Written by: Gary Howes
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File image of Andrew Bailey, image © FCA, changed from original by Pound Sterling Live.
Bank of England Governor Andrew Bailey confirms a 50 basis point rate hike is indeed likely in August.
Bailey said that although a 50bp hike is likely it is not necessarily locked in.
The comments were part of his Mansion House speech, the text of which has been released ahead of this evening's annual Mansion House dinner event.
The comments will underpin the market's current expectations for such an outcome and could help underpin the Pound.
Indeed, at the time of writing the Pound has clawed back earlier losses against the Euro and extended gains against the Dollar.
The Pound to Euro exchange rate is at 1.1747 with bank accounts quoting in the region of 1.15 while independent providers are quoting towards 1.17. The Pound to Dollar is up by two-thirds of a percent at 1.2040, banks are quoting in the region of 1.1780 and independents at 1.1980.
"In simple terms this means that a 50 basis point increase will be among the choices on the table when we next meet. 50 basis points is not locked in, and anyone who predicts that is doing so based on their own view," said Bailey.
Mansion House speeches have proven significant in the past in that Bank of England Governors have used it as an occasion to signal significant monetary policy shifts.
Bailey's latest comments therefore underscore the Bank will act more forcefully and sooner in order to bring UK inflation under control.
Bailey also said it is also time for the Bank to discuss the strategy for beginning to sell the gilts held in theirsset Purchase Facility portfolio.
They will publish, alongside the Monetary Policy Report, more detail on how they will do this, to allow financial market participants to make the necessary preparations
The sales could commence as early as September and the Bank looks set to reduce the stock of gilts held by the APF, which covers both sales and gilt redemptions, of something in the region of £50‐100bn in the first year.