BoE: Rate hike coming in November? - BBH

The Bank of England meeting in early September again put the market on warning that a rate hike may be delivered as early as the next MPC meeting in November, notes the analysis team at BBH.  

Key Quotes

“It was the first time since 2015 that Governor Carney provided such forward guidance.  This helped drive sterling its strongest monthly gain (3.6%+) in four years.  But here too all may not be as it seems.  Inflation is expected to peak in the coming months, as last year’s sharp currency depreciation works its way out of year-over-year comparisons.  The economy is slowing, and this week’s PMI readings are likely to show that momentum was still weakening as the Q3 wound down.”

“Brexit dynamics are also changing.  May’s recognition of financial obligations to the EU and her request for a transition period inches the negotiations forward.  The key issue at this juncture is whether it is sufficient to persuade the EC to allow the start of parallel negotiations on the post-Brexit relationships as well the terms the separation.  As Brexit talks continue and May’s position has evolved, tensions have intensified anew within the Tory Party.  The week’s Conservative Party conference will likely give play to these divisions.  That said, the Labour Party conference the previous week did nothing to alleviate the concerns of investors.”