A 25 bps rate hike from the Bank of England is widely expected to be announced today. Economists at Rabobank do not expect the GBP to see lasting post-meeting gains.

Two or three more rate hikes could tip the UK economy into recession

“External MPC members Tenreyro and Dhingra have already made it very clear that they do not support further rate hikes from the BoE. This will make is difficult for the MPC to sound aggressively hawkish this week. That said, we foresee no change to the Bank’s policy guidance which warns of further tightening in monetary policy if there is evidence of more persistent inflations pressures.” 

“An acknowledgement of the UK’s improved performance this spring could also enhance the Bank’s hawkish bias. However, with so much tightening already in the price, GBP may struggle to hold any post-meeting gains, particularly given the risk that two or three more rate hikes could tip the UK economy into recession.”