BoE guaging vulnerablility to rate hike shocks - BBH

By FXstreet.com | Updated July 30, 2014 AAA

FXStreet (Guatemala) - Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman explained they know that rates in the UK (and everywhere else, for that matter) will eventually rise back towards more “normal” levels.



Key Quotes:



"This stress test assumes a 300 bp rise in the BOE’s bank rate, which would impact mortgage payments that are largely floating rate. We would not take that as a signal of BOE intent."



"Rather, the BOE is gauging the potential vulnerability of a UK borrower to a large interest rate shock, as well as a VAR exercise for the lending banks, if you will. We know that rates in the UK (and everywhere else, for that matter) will eventually rise back towards more “normal” levels."



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