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Mar 16 - 10:55 AM

GBP: BoE Hike May Prove Fleeting +ve For GBP - BofA

By eFXdata  —  Mar 16 - 09:30 AM

Bank of America Global Research discusses its expectations for tomorrow's BoE March policy meeting.

"We expect the Bank of England (BoE) to hike 25bp this week and signal further hikes in coming months. Russia's invasion of Ukraine and the resulting surge in commodity prices makes the inflation outlook much worse for the BoE. And the BoE were concerned about inflation expectations before the war. Growth will likely be weaker as real incomes are squeezed but we think that does not let the BoE off the hook on rate hikes. We expect five hikes this year. We expect one or two of the voters for a 50bp hike in Feb to switch to 25bp (giving a 7-2 vote) on the basis that the growth outlook has turned more uncertain," BofA notes. 

"We believe that the risks are skewed to a higher GBP initially should the BoE pivot hawkish. However, as the subsequent EUR response showed following the ECB rate decision, a hawkish central bank may not deliver sustained appreciation for a currency against the backdrop of current events in Ukraine," BofA adds.

Source:
BofA Global Research

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