Markets cut BOE rate pricing following policy decision


The distribution of votes is one thing, but with the fact that they hint at a drop in peak inflation while perhaps delivering aggressive tightening, it’s not exactly what the hawkish camp had hoped for. All of that covered here.

And when you add the fact that market prices sought 75 basis points and the BOE provided “only” 50 basis points according to economists’ expectations, that is enough to remind some of the future prices of the tightening BOE.

At the time of the decision, the OIS market had fully priced the discount rate at 3% in November. This has now dropped to a price of around 75% with odds of 2.75% instead now. On top of that, there have been consistent pullbacks for the 2023 meeting dates for the BOE of around 25 basis points on the curve as well.

The pound fell from 1.1350 to 1.1280 initially before holding around 1.1300 against the dollar. It’s not really a big reaction against the Swiss franc, but today’s decision won’t do much to help cable maintain a slightly positive momentum against the dollar if you compare that to the situation from the Fed yesterday.


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