Events in the Middle East are going from horrendous to catastrophic and, whilst it was a 9-0 vote to hold Bank Rate at 3.75% today the accompanying MPC minutes indicate a rate increase is very probable on 30th April after its next meeting, and not necessarily only 0.25%.
It is worth noting that although the Bank Rate announcement is made at midday on Thursdays the MPC meeting actually takes place over the previous 2 days and so the decision to leave Bank Rate unchanged would have been taken before the overnight hits on the Iranian and Qatar gas fields.
Gilt yields rocketed after the MPC statement, with the 2 year yield up today by a massive 36 basis points at 4.45%, 5 year up by 25 b.p. to 4.52% and 10 year up by 15 b.p. at 4.88%.
The impact on mortgage rates is obvious but we should expect even more short notice rate withdrawals and possibly even some temporary lender withdrawals as pricing rates in such a volatile market becomes increasingly difficult. Short term market turbulence on a similar scale to what followed the Liz Truss mini budget should be expected.
A period of stagflation is looking increasingly likely. Central banks can print money but not energy!
