Market: The BoE should raise its key rate by half a point on Thursday

by Jonathan Cable

LONDON (Reuters) – The Bank of England (BoE) is expected to raise its key interest rate by 50 basis points on Thursday to 1.75% to combat soaring prices, a Reuters survey on Monday showed. last week.

More than 70% of the 65 people polled between July 27 and August 1 expect a rate increase of half a percentage point, while the previous week they were a majority (54%) expecting an increase limited to 25 basis points.

Since its independence in 1997, the BoE has never raised its key rate by half a point.

The institution was the first of the major central banks to raise its rates in December in the face of inflation.

Since then, other issuing institutions have caught up, such as the US Federal Reserve, which last week raised its rates by 75 basis points for the second time in a row, or the Bank of Canada, which increased 100 basis points in mid-July.

BoE Governor Andrew Bailey recently said a 50 basis point hike was on the cards and markets are pricing in nearly 90% of such a probability.

“We expect the Monetary Policy Committee to step up the pace of tightening to 50 basis points. We believe the Bank needs to show resolve in the face of ever-increasing inflationary risks or it could lose control of the message. sent,” Fabrice Montagne told Barclays.

Inflation in June hit its highest level in four decades at 9.4% year on year, largely due to soaring energy costs and supply chain disruptions.

A poll last week indicated a 55% chance of a recession in the coming year – up from 35% in the June poll – but several economists polled declined to answer, saying the recession was already here. .

(Report Jonathan Cable; with Milounee Purohit and Vijayalakshmi Srinivasan; French version Laetitia Volga, editing by Nicolas Delame)

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