27 April 2022 - Hike may lead to Bank sell bonds

Bank of England Governor Andrew Bailey, when questioned about when the Bank would begin to wind down its support for the economy by divesting itself of Government Bonds that were purchased in order to add liquidity to the market during the Pandemic, answered that he imagined it would start when interest rates reached 1%. Bailey has developed a habit of answering questions about long-term issues without giving them due consideration, and often pre-empting the opinions of his colleagues on the MPC. While the opinion of the Governor carries significant weight, the Monetary Policy Committee comprises nine individuals and each vote carries the same weight. Popular opinion suggests that the mood of the MPC is sufficiently hawkish for them to agree to a further rate hike at next week’s meeting, despite clear evidence of a slowing economy. If the hike takes place, the rate will reach 1% and questions will be asked about the expected reduction in the size of the bank’s balance sheet. 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.