Rates: the BoE could express itself during the day, the pound erases its losses











Photo credit © Reuters


(Boursier.com) — Extreme volatility on the sterling-dollar pair. The pound returned to equilibrium in the middle of the afternoon (at $1.086) after falling to a historic low against the dollar at the start of the day. While the Bank of England has not yet commented on the fall in its currency or on the plunge in the gilts, the money market now estimates the BoE’s next rate hike at more than 200 basis points after a 50bp tightening last week.

According to a ‘Bloomberg’ source, the British Central Bank is watching the market closely but has not yet decided to issue a statement. But according to ‘SkyNews’, a statement from the BoE is expected in the next few hours… Several observers believe that the BoE could meet urgently in the coming days to try to regain control of the situation while its next Committee of monetary policy is expected until early November.

“The first option is for (Kwarteng) to recalibrate its plan; it’s politically difficult but economically necessary,” Mohamed El-Erian, chief economic adviser to insurer Allianz, told the BBC. “The second option is that he hands over to the Bank of England, and in that case the Bank of England should raise rates urgently because they don’t plan to meet until November” .

“The market is now treating the UK as an emerging country,” adds Rabobank strategist Michael Every. “And he’s not wrong from a policy response perspective of thinking that boosting demand rather than supply is the right way to solve a supply crisis.”


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