Bank of England Governor Andrew Bailey’s flurry of hawkish comments in recent weeks won’t translate into a vote for higher interest rates next week, according to HSBC Holdings Plc (LON:HSBA).
While markets are almost fully pricing in a 15-basis-point increase on Nov. 4, HSBC expects the nine-member Monetary Policy Committee to split 7-2 to keep borrowing costs on hold. Only Michael Saunders and Dave Ramsden, who pushed for an early end to bond purchases in September, opt to lift the benchmark lending rate, senior economist Liz Martins wrote in a note Tuesday.
Her outlook suggests a major surprise, with Bailey voting for no change after spending the past few weeks warning that the BOE would have to act to rein in inflation. His remarks drove a rush of bets for a move in November, at least six months earlier than most economists were anticipating.
With financial markets anticipating a move, no action probably would trigger criticism of the governor and the bank for not pushing back against growing expectations for a move in recent weeks.
The BOE’s credibility with investors has taken a hammering for similar events in the past. Its guidance was called into question under former Governor Mark Carney, who was branded an “unreliable boyfriend” and accused by lawmakers of misleading markets about future rate moves.
Martins says she expects policy makers to address investors’ outlook next week. She thinks policy makers may seek to curtail expectations that rates will rise past 1% by the end of 2022.
Read More: BOE to Defy Bets on November Hike, Former Rate-Setters Say (2)
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BOE’s Bailey Likely to Vote to Hold Rates in November, HSBC Says
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