After all MPC members backed the initial hike and one favored a larger move,
traders upped bets on a second consecutive Bank of England rate increase. The
interest-rate swap market now prices roughly a 50% chance of a 25bp December
hike, up from about 30% before the decision; markets also foresee nearly three
additional 25bp hikes by the end of next year. Repricing pushed UK two-year gilt
yields up as much as 5bp to 4.79%, while sterling held near $1.3465. Mitsubishi
UFJ international fixed-income strategist Hank Calenti said he does not expect
the Bank of England to wait until February to act and that, unless there are
clear signs high rates are weighing on the economy or durable peace emerges in
the Middle East, the Bank is likely to hike again in December.
