Bank of England delivers first rate hike in three years as gilt yields rise
TLT•The Bank of England raised its policy rate to 4% from 3.75% in an 8-1 vote, its first increase in more than three years, and said at least one more hike was likely if the US-Iran conflict continues. UK gilt yields rose, with two-year yields up about 2 basis points to 4.76%.
1. Rate decision
The Bank of England raised interest rates to 4% from 3.75% on Thursday, the first increase in more than three years. The Monetary Policy Committee voted 8-1; the dissenting policymaker sought a larger increase. The bank warned that at least one more hike was likely if the US-Iran conflict continues.
2. Market reaction
UK gilt yields rose after the decision, with rate-sensitive two-year yields up around 2 basis points at 4.76%. Sterling edged higher, while London's FTSE was up 0.7%.
3. Investor views
Aviva Investors’ Ed Hutchings said further hikes looked increasingly likely as inflation concerns remained elevated. Schroders’ David Rees said he expected UK rates to peak at 4.25%, while Wealth Club’s Susannah Streeter said markets were pricing in three further hikes.
