Although some progress has been made in the fight against inflation, interest rate futures markets are still discounting two further hikes this year. There is also a long-held view amongst economists and market commentators that the base rate will top out between 5.25% and 5.75%, although it would take a significant rise in headline inflation for another fifty basis points in hikes to receive support from the MPC.

This week’s output figures were “disappointing,” but do show that the Bank of England, despite the market’s opinions, is closer to stopping rate hikes than it was previously believed.

There is no fixed rule or standard by which to judge when rates have become restrictive upon demand.

It is a judgment call which will be made by the MPC. Again, it is unlikely that any decision will be unanimous since at least one independent member who already believes that rates are sufficiently restrictive and need to be allowed to “do their work.”

The Bank of England was the first G7 Central Bank to commence rate hikes and the odds now are that it will be the last to call a halt. There is hope but truly little expectation from traders that any hint will be given at next month's rate-setting meeting that a pause will be considered, let alone an end to the cycle.

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.