UOB forecasts a hawkish path for the Bank of England, projecting a 4.25% rate by February as inflation risks force the central bank to abandon its 'one-and-done' stance.
The Bank of England lifted the Bank Rate to 4.00% and signalled a hawkish shift, with CPI projected to reach nearly 5.0% by mid-2027 and stay above target until 3Q28. UOB expects another 25bps hike to 4.25% in Feb with risks skewed to further tightening, which supports higher UK rates and a stronger pound.
The Bank of England raised rates to 4.00% and signalled more hikes, with inflation now projected near 5.0% by mid-2027. Higher expected rates tend to attract flows into pound-denominated assets and support the currency.
UOB sees February as the more likely timing for the next 25bps hike to 4.25%, with December still possible and risks skewed towards additional tightening if inflation pressures persist.
The Bank of England has resumed its tightening cycle, lifting the Bank Rate to 4.00% amid persistent inflation risks. UOB analysts now expect a further 25bps hike to 4.25% by February, as the central bank warns that inflation may remain above target until 2028 due to elevated energy costs.
The shift toward higher interest rates and a hawkish outlook typically attracts capital inflows into pound-denominated assets, supporting the currency's value.
UOB identifies February as the most likely window for a 25bps hike to 4.25%, though they note that December remains a live possibility depending on inflation persistence.