Ulrike Kastens (DWS) | The Bank of England raised interest rates yesterday by another 25 basis points to 5.25%, the highest level in 15 years. The key factors were labour market tightness and stronger wage growth, while developments in base rates and services prices are in line with the central bank’s expectations. Overall, the message of today’s press release is much more balanced than that of the previous meeting in June 2023. While risks to the inflation outlook remain tilted to the upside, they are less pronounced than in May. In particular, wage developments will need to be monitored closely to see whether they could crystallise into persistent inflationary pressures. Conversely, although the central bank described the current level of interest rates as restrictive, there are no signs of a pause in monetary policy. In this scenario, mainly due to the ongoing strong wage developments, we expect a further increase in the base rate by 25 basis points to 5.50% at the next BoE meeting in September.
End of rate hikes in sight in UK
