• International Financial Outlook Report – November 2017

    Summary of forecast changes

    • In our view, the risk for UK interest rates is skewed to the upside relative to current market pricing. We maintain our forecast for the BoE MPC to hike Bank rate by a further 25bps to 0.75% for Q3 next year, but there is a high degree of uncertainty given the UK’s political and economic challenges.
    • The FOMC is expected to raise its policy rate to 1.25-1.50% at its December meeting. Next year, new Fed Chair Powell, if confirmed by the Senate, is expected to continue with the policy of gradual increases in interest rates. We forecast a further three hikes for 2018. The impact of quantitative ‘tightening’ and fiscal stimulus measures are key risks to the forecast.
    • The ECB is likely to fulfil its announcement of a reduction to €30bn in monthly net bond purchases until the end of September 2018. We expect the ECB to wind down its QE programme thereafter, paving the way for the start of interest rate increases from Q2 2019.
    • Our targets for 10-year gilt yields have been left unchanged this month, to 1.7% for end-2018 and 2.1% for end-2019. We see 10-year US Treasury yields moving up to 2.7% and 3.0% over the same timeframe. We see further flattening of the US yield curve.
    • We have maintained our forecasts for GBP/USD at 1.27 formid-2018, 1.31 for end-2018 and 1.37 for end-2019. Our targets for GBP/EUR are unchanged at 1.06 for mid-2018, 1.07 at end-2018 and 1.09 at end-2019.

    Read the full International Financial Outlook Report for November 2017.

    Read the previous International Financial Outlook Report for October 2017.

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