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MNI STATE OF PLAY: Fiscal Policy Clouds BOE Hike Debate

(MNI) London

A huge government fiscal package will complicate decision making as the BOE ponders its next hike.

The Bank of England’s Monetary Policy is set to split at its September policy meeting over whether to hike by 50 or 75 basis points, with a potentially huge rise in government spending adding another layer of complexity to considerations.

Analysts mainly expect 50 bps although market pricing suggests a greater than 50% chance of 75. The only MPC member to give any steer towards a 75bps increase has been Catherine Mann, with a Sept 5 speech making the case for front-loading hikes to tackle the risk of medium-term inflation expectations ratcheting higher, with the others largely silent since the August meeting.

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The Bank of England’s Monetary Policy is set to split at its September policy meeting over whether to hike by 50 or 75 basis points, with a potentially huge rise in government spending adding another layer of complexity to considerations.

Analysts mainly expect 50 bps although market pricing suggests a greater than 50% chance of 75. The only MPC member to give any steer towards a 75bps increase has been Catherine Mann, with a Sept 5 speech making the case for front-loading hikes to tackle the risk of medium-term inflation expectations ratcheting higher, with the others largely silent since the August meeting.

Keep reading...Show less