Markets reduce Bank of England tightening bets after Thursday’s policy update, cutting implied probability of a September hike.
The British Pound fell to 1.3444 against the US Dollar as traders scaled back expectations for a Bank of England rate hike in September. The implied probability of a move dropped from 60% to 30% following the central bank’s latest communication, which analysts described as cautious despite a split vote on the Monetary Policy Committee.
Deutsche Bank noted that 31bps of hikes were priced for year-end, down 11.4bps on the day. Governor Andrew Bailey’s remarks suggested a high bar for near-term tightening, though he warned that persistent Mideast conflict could trigger second-round inflation effects and necessitate rate increases.
Commerzbank analysts highlighted the BoE’s deliberate cautious tone, which tempered market fears of aggressive tightening. The shift in expectations reflects investor reassessment of the central bank’s policy path amid geopolitical uncertainties.