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BoE Announcement – November 3 2022 – A Dovish Hike

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GBPUSD, H1

BoE hiked key rate by 75 Bp to 3.00% – as expected¹. At the same time the BoE said the peak interest rate is “likely to be lower” Markets, which should limit future tightening expectations, are better than those implied by them. It was the exact opposite of what last night’s FOMC statement. It is the largest increase in UK interest rates since 1992 when the Major/Lamont government were forced to respond to the debacle of Black Wednesday and the now famous dumping of the Pound from the ERM and the Soros “£1 billion” profit trade.

MPC voted 7-2. One member opted for 50 bp while the other opted for 25 bp. This likely reflects the prospect of an austerity budget by the new government. This will help to keep demand down and inflation pressures out. A dovish rise The new projections foretell a accordingly -1.5% Next year will see a contraction in activity, which is followed by -1% In 2024. A 2-year recession.  The assumption is that the Bank Rate will Continue At 3%According to the assumption that inflation follows market expectations, it would fall below target for the fourth quarter 2025. Inflation, however, would still be just below the target. 1.4% To 2024 zero By the end of 2025. In order not to underestimate the…



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