Morgan Stanley sees two BoE rate hikes in November and February

Key facts

• Morgan Stanley now expects the Bank of England to deliver two 25 basis point rate hikes.
• The anticipated hikes are scheduled for November and February.
• Previously, Morgan Stanley expected no further rate hikes from the BoE.
• Morgan Stanley cited fiscal policy as a potential catalyst for further tightening.
• The Bank of England warned of potential rate hikes due to the Iran war.
• British inflation is predicted to exceed 4% early next year.

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.