JPMorgan Moves Up U.K. Rate Hike Forecast After Strong Jobs Data

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imageEconomy7 hours ago (Aug 17, 2021 13:50)

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(Bloomberg) — JPMorgan Chase & Co. (NYSE:JPM) brought forward its forecast for when the Bank of England may raise interest rates, saying the strength of the U.K. labor market makes a move likely in the second quarter of 2022.

Economist Allan Monks said the first 15 basis-point increase to 0.25% will come six months earlier than he previously expected, and more tightening will follow every six to nine months after that. He moved after official data showed record wage growth and job vacancies. 

“The market is showing strong demand for new net job creation, which is happening despite reported labor shortages,” Monks wrote in a report on Tuesday. A surge in employees on payroll was “hinting that most of those coming off of furlough remained with their existing employer or found a new job,” he said.

JPMorgan joins of Bank of America Corp (NYSE:BAC)., RBC Capital Markets LLC and HSBC Holdings Plc (LON:HSBA), which also see the BOE raising rates by the middle of next year. It’s a more hawkish stance than most economists, with the median forecast showing no move before the BOE’s November meeting in 2022.

Policy makers led by Governor Andrew Bailey are attempting a rapid rebound from coronavirus lockdowns doesn’t spark inflation. They’re watching the labor market signs that a shortage of workers is pushing up wages and consumer prices. 

The date of the first rate rise is crucial for U.K. government bond markets, which are looking for signs of when the BOE may stop reinvesting in gilts when its existing holdings mature. The BOE has said bank rate must rise to 0.5% before it makes that move.

Read More: U.K. Wage Growth Hits a Record as Vacancies Pass 1 Million

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JPMorgan Moves Up U.K. Rate Hike Forecast After Strong Jobs Data

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