Commentary: June interest announcement from the Bank of England

Commenting on the interest announcement from the Bank of England, William Marshall, Chief Investment Officer, HRIS – Hymans Robertson Investment Services, says:

“Today’s hold is no surprise. It’s consistent with the MPC’s stance of gradually cutting rates, i.e. cutting every other meeting, which leaves most investors now looking to August for the next cut. However, given what’s happening with oil prices, as a result of the conflict in the Middle East, August’s meeting may not be such a fully drawn conclusion. If the elevated oil price is sustained or even exacerbated this will raise inflation. Under normal circumstances, central bankers may look-through this kind of external shock, but the BoE will be concerned around any impact on inflation expectations and wage demands if CPI starts to approach 4%.

“As there wasn’t much uncertainty over the interest rate decision, there has been little reaction from the gilt market to today’s announcement. Despite the BoE already cutting 4 times since last August, gilt yields have remained stubbornly high, partially driven by global bond markets demand/supply dynamics. We expect this to continue to drive gilt yields over the next few months, but the attractive valuations could be a good entry point for long-term investors.”