Bank of England Deputy Governor Ramsden said in a speech in London on the 28th that if upward pressures on the inflation outlook intensify further, it could justify raising the policy rate. He expressed the view that rising energy prices could trigger a chain of wage and price increases, and explained that he continues to closely monitor the risk that higher energy costs associated with the Iran war pose to prices. The Monetary Policy Committee decided this month, by a vote of 6 to 3, to keep the policy rate unchanged at 3.75%, but it indicated that inflation is expected to peak at around 4%, a level significantly above the Bank of England's previous forecast. Investors expect a 0.25 percentage point rate hike at the Bank of England's November meeting. Ramsden stressed that the Bank of England's current policy stance is already restrictive, and said that without the Iran war, at least two rate cuts would have been made by now and the policy rate would be at least 0.5% lower than its current level.
Hawkish BoE signal (possible hike, investors pricing a November hike) makes sterling more attractive versus the dollar.
Ramsden signals a possible BoE rate hike if inflation overshoots, a hawkish policy signal that lifts UK policy-rate expectations.
