BofA Expects Two BoE Rate Hikes Amid Energy Price Concerns

Bank of America Global Research is forecasting two interest rate hikes from the Bank of England over the next six months. This change in outlook follows last week's BoE meeting, where policymakers struck a firmer tone on inflation risks.

The recent surge in oil and natural gas prices has raised concerns about persistent inflation. BofA economists expect the impact of this energy shock to be somewhat contained, but they warn that there are upside risks.

Markets currently price in a 67% chance of a BoE rate hike in November, with another increase expected in December. However, BofA believes that markets may be pricing in too much tightening, as it expects only two rate hikes before the BoE begins cutting rates in 2028.