**As seen in Risk In The Week report 01/27/23, cablefxm.co.uk/reports
The Bank of England raised its key policy rate by 50bps to 3.5%, in line with market expectations. However, the decision was split as six MPC members voted for a 50bps rise, 1 member voted for a 75bps hike and 2 for the Bank Rate to stay unchanged. BoE’s Mann voted for the three-quarter increase, while Tenreyro and Dhingra opted for no change. Some of the highlights worth reaping: the central bank dropped its guidance on rates, it said the U.K. is already in a recession and that the economy is set to drop by 0.1% in Q4, the government energy support was seen reducing CPI by about 0.75 ppt, while inflation was said to have peaked. On growth, the Q4 contraction is better than the 0.4% fall previously seen. BoE’s February MPC voting will be grab attention as it provides further colour into the central bank’s path of interest rates. The desk at Morgan Stanley said the balance of risk was tilting towards a 50bps rate hike after the December CPI print, they see a downside shift in February and another 25bps hike in March as another potential outcome. The desk at ING says that BoE’s Bailey will likely avoid to openly state whether the bank is likely to deliver another 25bps rate in March or if this will be the last move in the cycle. ING says it is probable we will keep hearing policymakers trying to dampen market expectations of policy easing.
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