The Bank of England (BOE) is expected to hike its policy rate by 25 basis points to 1.25%. A hawkish “Old Lady” could fuel concerns of a hard landing and put pressure on sterling, according to economists at Commerzbank.

It is difficult to predict how sterling is going to react

“The BoE is likely to hike its key rate from 1% to 1.25%, with some market participants expecting a 50 bps hike, which cannot be excluded considering high inflation rates of recently 9%.”

“At present, the market expects a number of further rate hikes this year. It will have to be seen whether the BoE supports these expectations today.”

“It is difficult to predict how sterling is going to react. Is it positive for Sterling if the BoE is hawkish? Or would this fuel concerns of a hard landing and put pressure on sterling? Considering the current market sentiment, I would expect the latter.”

See – BoE Preview: Forecasts from nine major banks, hikes to continue until inflation improves