HSBC warns the Bank of England’s Thursday rate decision could deliver a hawkish split vote, with some members potentially voting for a rise, though sterling upside looks limited with 60bps already priced.
HSBC warns the Bank of England’s Thursday rate decision could deliver a hawkish split vote, with some members potentially voting for a rise, though sterling upside looks limited with 60bps already priced. Summary HSBC analysts say the Bank of England’s Thursday rate decision could produce a split vote, with some members potentially voting to raise rates rather than hold The market consensus is positioned for a unanimous 9-0 vote to keep rates steady, making any dissent a hawkish surprise Sterling’s capacity to benefit from such an outcome looks limited, with the market already pricing roughly 60 basis points of tightening by year-end The possibility of a hawkish dissent reflects concern among some committee members about inflation risks, particularly as the Iran war threatens to drive energy and import costs higher Thursday’s Bank of England interest rate decision could deliver a hawkish surprise, with analysts at HSBC warning that the vote may not be the clean 9-0 hold that markets are broadly expecting.
In a note to clients, the bank flagged the possibility that one or more members of the Monetary Policy Committee could break ranks and vote for an outright rate rise, a development that would run counter to the dominant expectation of a unanimous decision to leave rates unchanged. The dissent, if it materialises, would reflect growing discomfort among some committee members about the inflation outlook, particularly as the Iran war continues to put upward pressure on energy and import costs. The BOE has been monitoring closely the extent to which businesses are passing on higher costs to consumers, a transmission mechanism that Governor Andrew Bailey has previously suggested remains contained relative to the 2022 inflation surge, when prices topped 11%.
Despite the potential for a split decision, HSBC’s analysts are cautious about reading too much into sterling’s prospects. The pound’s ability to benefit from a hawkish surprise is seen as limited, given that the…