Bank of England Signals Most Hawkish Stance Since 2023, Rate Hike Possible Next Month

Bank of England policymakers are sending their most hawkish signals in over three years, laying the groundwork for a potential interest-rate hike as early as next month, according to Bloomberg Economics' BOESPEAK model. The natural language processing index, which tracks communications from Monetary Policy Committee members, has jumped to its highest level since early 2023, when the BOE was raising rates to combat 10% inflation. The surge follows a slew of policymaker appearances, including at IMF and World Bank meetings in Bangkok. Economists and investors expect the MPC to back a quarter-point hike to 4% on Nov. 5, with at least three more increases priced in by July next year. The panel split 6-3 in favor of holding rates in September, meaning a shift by just two members would tip the balance. Governor Andrew Bailey has warned it is becoming harder to avoid a hike as the energy shock persists, while Deputy Governors Dave Ramsden and Clare Lombardelli have used similar language. Inflation is set to top 4% early next year, double the 2% target.