Crédit Agricole CIB notes the Bank of England hiked 25bp to 4% in November, with
a sole dissenter seeking a larger move — a hawkish signal. The BoE raised
inflation forecasts for this year and early next, upgraded 2026–27 growth
forecasts and lowered its 2028 outlook. Governor Bailey indicated further
tightening remains possible, while the Bank emphasized rates are already
restrictive and this is not the start of a new hiking cycle. Markets still price
additional hikes, keeping sterling among the higher-yielding G10 currencies, but
UK rates markets have largely priced in three further hikes and much of the
positive effect is reflected in the exchange rate. Near-term sterling upside
will require continued upside surprises in UK data; focus next week on September
GDP and speeches by Bailey and other officials.
