MUFG: BOE's decision to slow tightening likely precedes a final hike in September

<p>In the wake of the Bank of England's latest
monetary policy decision, MUFG has shared its analysis, suggesting that
while the pace of tightening has been slowed, another rate hike may
still be on the horizon.</p><p>Key Points:</p><ol><li><p>Reduced Tightening Pace: The BoE opted for a smaller
increment of 25bps in its latest rate adjustment, indicating a
deceleration in its tightening strategy.</p></li><li><p>Strong Majority for 25bps Hike: The decision to go
for a 25bps increase was backed by a robust majority. This stance
indicates that the bar has been set high for any future larger hikes of
50bps.</p></li><li><p>Door Still Open: The BoE hasn’t entirely shut the
door on further hikes. They've signaled that if there's more evidence
pointing towards sustained inflation risks, additional rate hikes might
be in the offing.</p></li><li><p>MUFG’s Forecast: MUFG anticipates one last rate hike in September, based on the current trajectory and statements from the BoE.</p></li><li><p>Immediate GBP Reaction: The decision for a smaller
rate increase led to a sell-off in GBP. However, the BoE's relatively
hawkish tone, coupled with prior dovish market repricing, helped cushion
the currency's fall.</p></li></ol><p>Summary:</p><p>MUFG has weighed in on the BoE's recent monetary policy adjustment,
interpreting the 25bps rate hike as a slowdown in the tightening
trajectory. Despite this measured move, the bank foresees one final rate
increase in September. While the immediate aftermath saw a dip in the
GBP's value, several factors have worked in tandem to temper its
descent. Investors and traders will be closely monitoring any cues from
the BoE in the lead-up to their next meeting.</p><p>For bank trade ideas, <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1691171162667000&amp;usg=AOvVaw2frvyoXI_XzO5WiSt6e37T">check out eFX Plus</a>. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1691171162667000&amp;usg=AOvVaw2frvyoXI_XzO5WiSt6e37T">Get it here</a>.

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This article was written by Adam Button at www.forexlive.com.