14.10.202608:44:08UTC+00Sterling Stabilizes as Traders Assess BoE Rate Outlook

Sterling steadied above $1.325, rebounding from recent three‑month lows as investors absorbed comments from Bank of England officials and looked ahead to US inflation data for clearer signals on the Federal Reserve’s policy trajectory. BoE Chief Economist Huw Pill, one of the Monetary Policy Committee’s most hawkish members, questioned market expectations for four rate hikes over the next year. He argued that, although the Bank should have responded earlier to the energy shock stemming from the Iran war, more compelling evidence was still needed to justify a larger increase in rates.

Governor Andrew Bailey, by contrast, cautioned that a rate rise would become increasingly hard to avoid the longer the energy shock endures. Markets are now assigning almost a 100% probability that the MPC will deliver its first rate increase in more than three years at its November meeting. Traders had previously fully priced in four 25‑basis‑point hikes by June 2027, but have since slightly trimmed those expectations.