Wednesday, May 19, 2004

After hiking interest rates 25 basis points in May, the Bank of England looks set for another go 'round in the near future, perhaps as early as July.
Bank minutes show the MPC voted 9-0 in favour of raising rates by 25 points to 4.25 per cent. Alongside the revelation that the committee discussed a hike twice this size, the minutes were more hawkish than expected, boosting sterling.

"It points to further rate rises ahead and it looks increasingly likely that they [the MPC] may not wait until the next inflation report to raise rates, making July the most likely time for a hike given inflation is likely to have crept higher by then," said James Knightley at ING Financial Markets.
Combine this with new beliefs that the Fed is in no hurry to begin raising US interest rates above their 1% level, and you get another big boost to the speculators running the dollar "mother of all carry trades".

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