Is it safe to buy Lloyds shares amid a hawkish BOE?


The Lloyds (LON: LLOY) share price is holding steady as investors react to the upcoming Bank of England (BOE) interest rate decision. The stock is trading at 53.16, which is about 5% below the highest level this year.

Bank of England decision 

Lloyds is one of the biggest banks in the UK. As a retail and commercial-focused company, the firm makes most of its money through interest. This is unlike Barclays, which makes money through other businesses like investment banking and trading.

Therefore, the Lloyds share price tends to be a bit sensitive to interest rates set by the BOE. The bank is expected to hike interest rates by another 0.25%. There is also a possibility that the bank will have an upside surprise and hike rates by about 50 basis points.

Another scenario is where the BOE provides hints that it will implement more rate hikes than what analysts are expecting. The base case for many analysts is that the BOE will implement three more hikes this year.

Conditions are ripe for a rate hike. For example, data published by the Office of National Statistics (ONS) showed that the country’s inflation jumped to the highest level in 30 years in December. With energy prices rising, there is a likelihood that prices continued rising in January.

At the same time, data showed that UK home prices continued rising in January. Higher home prices are a good thing for Lloyds, which aims to become the biggest landlord in the UK in the next few years.

One of the biggest risks for Lloyds share price is if the housing market bubble rises. Analysts are concerned about whether demand for homes will keep rising as rates start rising. At the same time, high-interest rates could slow uptake for loans, which could hurt Lloyds Bank.

Lloyds share price forecast

The daily chart shows that the LLOY share price has been in a strong bullish trend in the past few days. During this time, the stock has managed to move above the key resistance level at 51.55, which was the highest level in November.

The stock has also moved above the 25-day and 50-day moving averages. Therefore, there is a likelihood that the bullish momentum will continue in the coming days. If this happens, the stock could rise and hit the next key target at 60p.

The post Is it safe to buy Lloyds shares amid a hawkish BOE? appeared first on Invezz.