MNI BRIEF: Nov Hike Seen Larger Than Expected In Aug: Bailey

The Bank of England may have to raise rates at a faster pace in November than thought at the time of the August inflation round, Bank of England Governor Andrew Bailey said Saturday, opening the door to larger rate hike the the 50 basis point one seen in September. As of Friday, financial markets were pricing in a near full 100 basis points of hikes come the Nov 3 meeting.

Since August, the UK government has introduced a two-year energy price cap which is set to dampen inflation in the near-term but, by easing pressure on household, finances will feed through to stronger demand and will end up boosting inflation down the line. "My best guess is that inflationary pressures will require a stronger response than we perhaps thought in August," Bailey said,

Repeating comments from the September policy statement and minutes, Bailey said that the energy price guarantee should cap inflation around 11% but that it would "add to inflationary pressures towards the later part of the two-year period on which we focus."

In other remarks, Bailey stressed that the Bank's operation to buy long-dated gilts was all about financial stability and liquidity and that it is now over, with the BOE having stuck to its Friday deadline.