The Bank of England Raise Rates as Expected, But Sees Lower Growth
The Bank of England raised interest rates by 25 basis points to 0.5%. The vote was 9-0, and this was the first rate hike since 2007. The inflation report released simultaneously showed that the BoE sees inflation at the consumer level peaking at 3.2% year over year versus their previously expected 3% cap. The QE and corporate bond buying totals were left unchanged. Projected growth is forecast to come in lower and Brexit has weighed on sentiment. The expected hike yielded a sell-on-the-fact reaction, pushing Cable sharply lower.
Separately, UK October construction PMI came in much better than forecast, albeit on the back of a much worse than expected outcome in the previous month. The headline reading for the October survey lifted to 50.8, indicating that the sector is back in expansion, although marginally so, after tipping to 48.1 in September. The median forecast had been for a 48.5 outcome.