OCBC highlights that the Bank of England’s (BoE) latest communication has triggered aggressive market repricing, with almost 85 bps of hikes now priced for 2026. This makes the bank’s previously expected BoE cut in 3Q26 less certain, with an extended hold more plausible. Forecasts still show GBP/USD broadly stable around 1.33–1.35 over the next year.

BoE hawkish risk but growth concerns

"The BoE’s message was straightforward: policy is on hold, but rate hikes are possible if needed."

"Markets reacted aggressively, pricing almost 85bp of hikes for 2026."

"This makes our expected BoE cut in 3Q26 less certain, with an extended hold now more plausible."

"While hawkish risks to our BoE and ECB forecasts exist, the scale of market repricing looks excessive relative to the growth slowdown that would follow if energy prices remain elevated."

"Higher oil is not just an inflation shock—it is also a growth drag, a classic stagflation mix. This week’s March PMIs and other sentiment surveys will offer the first read on the damage. The numbers will likely soften, which may not bode well for risk assets."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)