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ING: 1% rates by May then pause; low volume gilt sales enough to pause hikes

  • “The fact that four out of nine Bank of England rate-setters voted for a 50bp rate rise at the February meeting shows that policymakers are keen to act pre-emptively amid high headline inflation rates. We now expect further rate rises in March and May.”
  • “We don’t think the initial phases of the Bank’s quantitative tightening programme, which by ending reinvestments will see a modest £25bn roll-off the balance sheet, will stop the Bank from implementing further rate rises in the near term.”
  • “We also think that the Bank may pause for thought when rates reach 1%. At this point, policymakers have said they will “consider” actively selling government bonds to speed up the process of shrinking its balance sheet… Even though any sales may initially be in low volumes, we suspect policymakers may still opt to pause rate hikes to monitor the impact. We also suspect the BoE may become a little more relaxed about the risks surrounding inflation as the year moves on and Bank rate moves higher.”

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