Economist at UOB Group Lee Sue Ann reviews the latest interest rate decision by the BoE (June 22).

Key Takeaways

In a surprise move, the Bank of England’s (BOE) Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase the Bank Rate by 50bps to 5.00%. Similar to the previous two meetings, the MPC kept the statement, “If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required”. 

Latest inflation data for the UK came in hotter than expected. Headline CPI rose by an annual 8.7%, unchanged from the previous month, but higher than consensus of 8.4%. Core inflation gained by an annual 7.1%, up from 6.8% in Apr, and the highest rate since Mar 1992.  

Given the latest BOE’s decision and inflation backdrop, we believe the BOE is on track to hike by a further 25bps at each of its next two meetings (3 Aug and 21 Sep). The risks to our view are to the upside, and we will review our rate call following the Aug decision