Morgan Stanley has revised its interest rate forecast for the Bank of England, now anticipating two 25 basis point hikes in November and February. This shift comes after the BoE's recent decision to hold rates steady but with a warning that further increases might be necessary if the Iran war escalates, potentially pushing inflation above 4% early next year.
The shift in Morgan Stanley's forecast suggests a more hawkish outlook for UK monetary policy, potentially impacting borrowing costs and economic growth if inflation proves more persistent than previously anticipated.
Morgan Stanley has shifted its stance on the Bank of England's interest rate policy, now forecasting two 25 basis point increases in November and February. This marks a departure from their previous expectation of no further hikes for the foreseeable future. The analysts noted that fiscal policy could be a key driver for additional tightening. Despite anticipating a slowdown in growth at the turn of the year, they see balanced near-term risks due to the robustness of global growth. The Bank of England recently held rates steady but indicated that further increases might be necessary if the conflict in Iran escalates, which could push British inflation above 4% early next year.
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