BoE preview: MUFG expects November rate hike as energy shock pushes UK inflation above 4%

MUFG, in a Bank of England preview, expects the central bank to raise rates in November as an energy shock pushes UK inflation above 4%. The transmission runs through inflation repricing: a sustained energy-driven overshoot raises the risk that the BoE tightens to anchor inflation expectations, which lifts short-end gilt yields and steepens the policy-rate curve as markets reprice the path of Bank Rate. Sterling is the most directly exposed asset, since a rate-hike expectation widens the UK-versus-peer rate differential and tends to support GBP, while gilts and rate-sensitive UK equities face pressure from higher discount rates. Energy-intensive sectors and UK utilities also carry exposure to the underlying price shock. Traders will watch the upcoming UK CPI release and the BoE's accompanying policy statement and vote split for signals on whether a November move is being priced as base case.

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