Caught Off Guard In August, Is A November Hike In The Cards?
In an unexpected move, the Bank of England decided to lift the overnight lending rate by 25 basis points to 4.75 percent at its August meeting. This outcome was almost entirely unexpected given the reduced staff of seven policy members and still questionable trends in recent economic data. Consequently, this impromptu decision produced a sizable run in volatility for the British pound not seen since the solid bid found in April. In retrospect, many economists have said the data lined up for policy officials before the rate decision was made suggesting such a shift was on the books, while a 40 percent chance of a rate hike going into the meeting was also the greatest since 2003. Looking ahead towards the November meeting, the probabilities of another rate hike implied with futures positions have grown markedly; and the same economic conditions contributing to August’s decision are still present. The biggest red flag leading many to believe another rate hike is in the works are the persi
