17:33דצמבר 01, 2021MT Newswires

Commerzbank on The Possible Bank of England Rate Hike in December

Commerzbank said it looked so far likely that the Bank of England (BoE) hike its key rate in December following the disappointment in November.

The recent labor market data pointed that way, as the United Kingdom labor market continued its recovery even though the government's furlough scheme came to an end in September, wrote bank in a note to clients. The uncertainty on that front had been the main reason why the BoE hadn't yet hiked interest rates.

As a result, BoE Chief Economist Huw Pill stated last week that the ground was laid for monetary policy measures and that inflation would remain above the 2% target if the BoE left its key rate unchanged.

The bank asked if that that meant a rate hike in December was a foregone conclusion. The foreign exchange (FX) market didn't seem to be entirely certain any longer.

The expectations were lowered over the past days, pointed out Commerzbank. Of course, this was due to the recent developments in connection with the COVID-19 pandemic and concerns that the economic recovery might struggle.

However, the Omicron variant could also have consequences for the development of inflation, as BoE member Catherine Mann explained Tuesday. Possible port and factory closures in China might reinforce supply shortages and further fuel inflation.

Inflation was causing increasing concerns for the BoE as recent comments illustrated, added Commerzbank. As a result, a rate hike in December wasn't off the agenda yet.

However, if uncertainty in connection with the pandemic remained elevated over the coming weeks, that was likely to put depreciation pressure on sterling (), according to the bank.