Bank of England heading for ‘generational squeeze’ on personal income in UK, says BofA in bearish note on sterling

There are dovish rate hikes and other hawkers.

As the US Federal Reserve embarks on a tightening cycle that forecasts up to 11 quarter points of hikes, the Bank of England is more cautious, even though it has made three rate hikes this year compared to only one last year. fed.

Bank of America strategists Kamal Sharma and Myria Kyriacou say the Bank of England is raising rates for the wrong reasons. They noted a “tinge of regret” in the latest decision, writing that UK rate hikes would not necessarily be constructive for the pound. The Bank of England downgraded the language associated with future rate hikes from “likely” to “might” be necessary.

“With the [monetary policy committee] seeming almost to apologize for increasing once again, this shows us the weak position the BoE finds itself in: increasing due to supply shocks (one of which – Brexit – which it still does not recognize not) and in the context of generational pressure in personal incomes,” they said.

Bank of America analysts said they were puzzled by the pound’s resilience during the Ukraine crisis, especially against the euro. They say it’s because the large share of energy stocks means the UK market UKX,
remains the preferred exposure to the equity market in Europe, “but how resilient this narrative will be in a context of slowing growth remains to be seen.”

The GBPEUR pound,
gained 1% against the euro and fell GBPUSD,
2% against the dollar this year.