Bank of England could surprise with more hikes in 2019, strategist says

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Mark Carney, governor of the Bank of England (BOE).

The Bank of England is likely to surprise market players with a stronger rate-hike path next year, a strategist at J.P. Morgan Asset Management said Monday.

The central bank is due to meet Thursday and is thought likely to deliver a much-anticipated rate hike at a time when concerns over Brexit are deepening.

Many analysts have started considering the possibility of a collapse in Brexit negotiations — as both European Union and British policymakers voice preparations for a potential abrupt break-up in March next year.

Recent data has suggested that the U.K. economy might be experiencing a temporary slowdown — but it is still growing, the manufacturing and services sectors are sounding more positive, and the labor market is still resilient with an employment rate as low as 4.2 percent.

“The BoE must demonstrate that it will look through temporary weakness,” Karen Ward, chief market strategist at J.P. Morgan Asset Management, said via email, adding that a rate hike is “likely” Thursday.

The BoE will also “indicate that a path of very gradual tightening remains appropriate,” she said.

Although Brexit remains a big uncertainty as negotiations are far from concluded, Ward said that “by the end of the year it will be clear that the U.K. is headed towards a softer Brexit and that the Bank of England will raise rates in 2019 more than the market is currently priced.”