In the Asian session on Thursday (June 1), GBP/USD rose slightly, temporarily reporting 1.2440, an increase of 0.02%. Institutional analysis adjusted the Bank of England terminal interest rate forecast to 5.25%, which they expect to reach in September, after the previous forecast of 5% in August. They pointed out that although the Bank of England has been reluctant to raise interest rates further, it is believed that persistent inflationary pressures will prompt the MPC to tighten policy further.
Bank of England dynamics
Institutional analysis has maintained its baseline forecast of no rate cuts until the second quarter of 2024, and now expects the Bank of England to raise rates higher than the Fed – an outcome that seems remote but has historically been the norm. While the market is pricing in a high probability of a 50 basis point rate hike in June and August, they see significant hurdles to a faster pace of tightening, given that the UK economy is still digesting much of the upcoming austerity measures and the labor market is reopening. balance, and the tightening cycle of other major central banks is drawing to a close.
