Barclays: Positioning for the Bank of England to Hold Steady This Year, While the European Central Bank Continues to Hike Rates

According to a report by Golden Finance on July 17, Barclays strategists recommend positioning for a narrowing of the December policy rate spread between the Bank of England and the European Central Bank's deposit rate. They anticipate that the Bank of England's rate hikes this year will be smaller than those of the European Central Bank. Fixed income strategists, including Moyeen Islam and Rohan Khanna, wrote in a report on Thursday, "If U.S.-Iran negotiations resume and energy prices decline, we believe the market will more quickly lower its expectations for Bank of England rate hikes compared to the European Central Bank, as the Bank of England's language around economic growth and labor market risks is more cautious." Currently, the money market expects the Bank of England to raise rates by a total of 37 basis points by the end of December, compared to 41 basis points for the European Central Bank. Barclays economists predict that the European Central Bank will hike rates one more time, while the Bank of England will keep rates unchanged.