Bank of England would consider more hikes if inflation remains persistent

Bank of England Bailey went for an eleventh consecutive rate hike on Thursday despite global banking shakedown. Out of the seven-member team, Monetary Policy Committee (MPC) members Swati Dhingra and Silvana Tenreyro voted for an unchanged monetary policy while others favored a 25bp rate hike.

About the surprise jump in February’s inflation, the Bank of England said that the surprise jump in the price index was the outcome of volatile clothing prices, which could prove less persistent. The central bank is very much confident that inflation will start decelerating rapidly from the second quarter. However, the labor shortage and higher food prices might continue to keep inflation at elevated levels.

Analysts at Danske Bank consider that both growth and domestic inflation have surprised to the upside and given BoE’s message, they pencil in an additional 25 bps hike in May 2023.

On Friday, a decent action is expected from the Cable as preliminary S&P Global PMI (March) figures for the US and the UK will be released. The Manufacturing PMI is expected to trim to 47.0 from the former release of 47.3. And, Service PMI might soften to 50.5 from the prior release of 50.6.

As per the consensus, UK Manufacturing PMI would improve to 49.8 from the former release of 49.3. While Services PMI will drop to 53.0 vs. the prior figure of 53.5.