— This is the script of CNBC's news report for China's CCTV on September 15, Friday.
The Bank of England (BOE) is holding its horses on matters of interest rates and asset purchasing. BOE's Monetary Policy Committee has voted by a majority of 7-2 to maintain interest rate. All of these are consistent with what analysts have previously expected. But what was unexpected is when the BOE issued a hawkish statement saying that if potential inflation rises and unemployment rate keeps going down, there may be a possibility of raising the interest rates in the "next few months". In a discussion this morning, some analysts told CNBC that the earliest possible time is in November. And in response to the BOE's statement, investors flock to buy the British pound.
Right after BOE's announcement, there was a sharp appreciation of the pound, with a slight nudge up against the dollar. Intraday gains stood at more than 1%, setting a new record high in one year. Besides, investors are also re-adjusting their expectations on the time the rate hike.
According to Overnight Index Swap that tracks BOE's interest rate, from September 7, UK's time, to September 14, it can be clearly seen that the expected time for rate hike has shifted forward. Currently, the market expects rate hikes to take place before the end of this year but just a week ago, the market expected the rate hike to be at the end of 2018.
In the latest policy meeting, the ECB expressed that it will start discussing its asset purchasing program in October. Coupled with the BOE's position and the Fed who also looking to a rate hike, analysts have expressed that what all these mean is that the three most important banks in the world are entering a new chapter of monetary normalization.
[Mark Konyn, Group CIO, AIA] "I think before year end it would occur. I think the direction is now more important. We are seeing ourselves position portfolios to take account of the fact that a number of the large economies now are trying to engineer a pathway away from that extreme period of stimulus."
From the economic report in August, the UK economy showed a slightly stronger growth than expected. Its GDP grew 0.3% in the second quarter while its unemployment rate continued to be look good, falling to 4.3%, which is a record new low in 40 years.
But investors who are on the negative side have expressed that there is no need to be too optimistic about BOE's statement. The risk that the UK economy faces is still not relatively low, and the upcoming Brexit negotiations will continue to pose challenges for the British economy and its financial markets. It is very likely that British Prime Minister Theresa May will reaffirm the Brexit Plan at Conservative Party's meeting, next week, 22nd September, UK's time.
The market is also closely watching this event.
CNBC's Qian Chen reporting from Singapore.