Omicron to put BoE rate hike on hold for now
A December rate hike would require the Monetary Policy Committee (MPC) to be satisfied that the end of the furlough scheme was benign and that the Omicron variant won’t derail the recovery. The majority have likely seen enough to be sure of the labour market recovery but will want more evidence on Omicron.
We expect the MPC to signal that the first hike is imminent if Omicron doesn’t result in greater restrictions on activity.
What you will learn:
- The MPC sent two clear messages at its November meeting. First, that it’s ready to raise interest rates as soon as it’s been reassured that the end of the furlough scheme didn’t cause in a sharp rise in unemployment. And second, that market pricing implying the Bank Rate would be 1% by the end of 2022 was too aggressive.
- The ONS cautioned that some of those made redundant may still feature in the PAYE series for a few months until they’ve worked out their notice period, but the impact should be modest.
- Less timely LFS data reported a big drop in unemployment and a record level of job-to-job moves in Q3, while unfilled vacancies reached a new high.
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