Barclays: Expecting the Bank of England to Hold Rates This Year, While the European Central Bank Continues Raising Rates

Glonghui, July 17 — Barclays strategists recommend positioning for a narrowing of the December rate spread between the Bank of England's policy rate and the European Central Bank's deposit rate. They expect the Bank of England to raise rates by less than the European Central Bank this year. Fixed income strategists, including Moyeen Islam and Rohan Khanna, wrote in a report on Thursday, "If the US and Iran resume negotiations and energy prices fall, we believe markets will more quickly lower their expectations for Bank of England rate hikes than for the European Central Bank, as the Bank of England has taken a more cautious stance on economic growth and labor market risks." The money market currently expects a cumulative 37 basis point increase by the Bank of England by the end of December, and a cumulative 41 basis point increase by the European Central Bank. Barclays economists expect the European Central Bank to hike rates once more, while the Bank of England is expected to hold rates steady.