Bank Of England's Bailey Says Investors Should Not Count on UK Rate Hikes

• Bank of ​England (BoE) Governor Andrew Bailey said on Wednesday that markets were still getting ahead of themselves by pricing in interest rate hikes by the central bank, which wants to ‌avoid adding to the damage Britain's economy faces from the Iran war.
• Bailey highlighted that BoE policymakers would need to keep a clear focus on risks to growth and jobs as well as inflation when making their next decision on rates. The war in the Middle East has driven up energy prices sharply, fuelling inflation but also dealing a wider blow to the global economy.
• Bailey also highlighted the risks the Iran war posed to heavily leveraged ​financial markets, following the central bank's warning earlier in the day of fragility in private credit and bond markets.
• Financial markets are currently pricing in two rate hikes by the BoE this year - and ​have previously priced in as many as four - while most economists expect rates to stay on hold. S. bank J.P. Morgan said it now only expects the BoE to raise rates in June, rather than its ​previous forecast of hikes in April and July.
• While the BoE voted unanimously to keep interest rates on hold at 3.75% last month, Bailey has been the swing voter on the Monetary Policy Committee in ​previous meetings. Some members have talked about a possible need to ‌raise rates to ⁠stave off inflation threats, but Bailey said a precautionary rate rise might not be in line with his view of how the BoE should implement its remit to keep inflation at 2% over the medium term.
• Bailey approvingly cited comments made during a jump in inflation in 2011 by then-BoE Governor Mervyn King, who said it was the BoE's job to discharge its remit in a way that causes the least ​damage to the economy and the people

(Source: Reuters)