MPC minutes: Two more interest rate hikes on cards, maybe even a third

The Bank of England's Monetary Policy Committee minutes indicate that policymakers see two further interest rate hikes as likely, with a third possible, signalling that tightening is not yet complete. The guidance points to a rate path that remains restrictive for longer than markets may have priced, which tends to widen the rate differential supporting sterling against lower-yielding currencies and pushes gilt yields higher as expectations for the Bank Rate are revised upward. Gilts, short-dated sterling instruments, and rate-sensitive UK equities such as housebuilders and highly leveraged domestic names are the most exposed, since higher discount rates and funding costs weigh on their valuations and cash flows. The next concrete catalyst for traders is the UK consumer price index release, where any upside surprise in services inflation would validate the committee's hawkish bias and likely intensify repricing in the short end of the curve.

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