Why Bank of England Hawks Are Gaining Ground as Inflation Heads Above 4%
Bank of England officials have become the most hawkish since early 2023, with markets now pricing a near-certain rate hike on November 5.
Bloomberg Economics built BOESPEAK, a natural language processing model that scores the tone of Monetary Policy Committee members. Scores above zero signal hawkish sentiment, meaning a preference for higher interest rates.
The index jumped after public appearances by MPC members, including at International Monetary Fund meetings in Bangkok.
The rise in the index is striking and has coincided with the ramp up in energy costs in recent months.
Hanson expects hikes in November and February. However, he concedes the committee could simply be talking tough.
Governor Andrew Bailey holds a swing vote. He says prolonged high energy prices make a hike harder to avoid.
Deputies Dave Ramsden and Clare Lombardelli have echoed that warning as the Iran war continues.
Policy Split and Global Comparison
The committee remains split. Deputy Governor Sarah Breeden said on Oct. 15 that 2022 taught firms to absorb costs instead of raising prices.
Doves Alan Taylor and Swati Dhingra, who favor looser policy, urged caution.
The BoE kept rates at 3.75% in September, while the Federal Reserve raised its target range to 3.75% to 4%.
A November hike would put the BoE on the same path as the Fed and ECB. Japan’s central bank has already moved, with its September rate hike lifting the rate to 1.25%.
Investors expect at least four hikes by July, a path Chief Economist Huw Pill has questioned.
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