BoE First Hike In Q1 '17 Assuming No Brexit
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As expected, the Bank of England’s (BoE) policy decisions kept both the Bank Rate and stock of purchased assets unchanged at 0.50% and GBP375bn, respectively. Both votes were unanimous (9-0). Some of the initial GBP appreciation is likely linked to some speculation about whether one member would vote for an immediate cut
Overall, the market reaction was limited, although we saw a slightly stronger GBP. Markets price in a 36% probability of a BoE cut before year-end 2016.
We expect the first BoE hike in Q1 17 (probably in February) based on the assumption that the UK remains in the EU, but risks are skewed towards a later hike.
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