Bank of England anticipated to hold benchmark rate, pound sterling near multi-month low

Governor Andrew Bailey and the Bank of England’s (BoE) Monetary Policy Committee (MPC) are expected to maintain the benchmark rate at 5.25% today, in light of signs indicating a weakening British economy and high wage growth. This decision aligns with the BoE’s “higher for longer” strategy, which aims to manage inflationary pressures by keeping benchmark rates elevated, even though the market prices a terminal rate of 5.5%.

The Pound Sterling is currently trading near a multi-month low against the US Dollar, with challenging the weekly high near 1.2200.

Inflation management remains a challenge in the UK, with shop price inflation standing at 5.2% and Consumer Price Index (CPI) increasing by 6.7% in the 12 months to September. Nevertheless, a hawkish stance is anticipated from the BoE.

Meanwhile, global markets are grappling with uncertainties arising from conflict in the Middle East. The Palestinian group Hamas has instigated a war with Israel, leading to a ground invasion of the Gaza Strip.

In related news from the US, Federal Reserve Chairman Powell has kept rates at 5.5%, voicing uncertainty about additional hikes but ruling out rate cuts. The announcement of predictable sizes for the US Treasury’s $112 billion auction brought some relief to the market.

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