Rates as of 0500 GMT

Market Recap

GBP was in the spotlight yesterday. The Bank of England hiked 25 bps to 1, a 13year high, as expected. It also confirmed that it will start selling some corporate bonds from September and consider selling gilts later in the year and thereby reducing its balance sheet. Furthermore, three of the nine members of the Monetary Policy Committee MPC dissented as they preferred a 50 bps hike. So why did GBP plunge?

Two reasons. One, while three members wanted to hike rates faster, apparently some members thought to be two preferred a pause in hikes. This difference was reflected in a more hedged forward guidance. In March, the forward guidance read

the Committee judges that some further modest tightening in monetary policy may be appropriate in the coming months, but there are risks on both sides of that judgment depending on how mediumterm prospects for inflation evolve.

This time however it reads

most members of the Committee judge that some degree of further tightening in monetary policy may still be appropriate in the coming months. There are risks on both sides of that judgement and a range of views among these members on the balance of risks emphasis added.

They added that most members think further tightening is necessary, implying that some members dont. The fact that the word modest was taken out implies that these members dont think any further tightening is warranted. Furthermore, the range of views among the members implies…