DAVY VIEW

Yesterday’s (September 21st) surprise decision to hold rates at 5.25% could well reflect that the Bank of England had seen a preview of today’s PMI surveys for September. Today’s composite PMI could show the UK economy contracting at an even faster pace than August’s 48.6 reading, as the post-COVID-19 rebound in consumer spending fades and the impact of higher interest rates is felt. Yesterday, markets were still unconvinced that interest rates had peaked, pricing in a 70% probability of one more hike. This view could change today.