No G7 country currently has higher core inflation than the UK, and the Bank of England's credibility has taken a hit as a result of its decision making to this point. Many were surprised by its latest hike of 50bp, but the announcement certainly signals that the fight against inflation is stepping up a gear. We asked our leading macro and investment specialists for their views in this quick take.

1. The Monetary Policy Committee is learning lessons from the last few months

The central bank is adopting an attitude that emphasises the severity of the situation. Many have levelled blame at the speed of the Monetary Policy Committee's decision making, but kinder critics remind us that their task is unenviable; it has been an especially difficult period in which to set policy. Forecasting has become even more difficult than usual, but the MPC has refrained from any language that could indicate that interest rates might be close to their peak. Even without any specific guidance, this decision has certainly set the tone for future meetings, and investors would be wise to prepare for tougher policy ahead.

2. UK recession risk continues to rise

"A faster pace and higher end point for interest rates suggests a hard landing for the UK economy will be difficult to avoid." Katharine Neiss, Chief European Economist, PGIM Fixed Income

The fact that seven members of the MPC voted for this hike suggests the BoE is questioning its models and leading inflation metrics, which have pointed to improving outcomes for some time. Whilst aggressive rate rises could mean the BoE tames inflation, the subsequent economic damage and policy lags create the risk that not only will they be chasing rates on the way up, they will be chasing them on the way down too. Everything seems ancillary to the task of controlling inflation, with the heightened risk of recession an unpleasant but unavoidable consequence.

3. Risky assets have been resilient…so far

"I would expect risky asset markets to start putting more weight on the negative growth implications of tighter monetary policy. That means downward pressure on GBP, despite higher interest rates, and selling pressure on spread product and equities." Guillermo Felices, Global Investment Strategist, PGIM Fixed Income

This dynamic is not new to the UK. This was also the case before the mini-budget rout when higher interest rates and growth concerns led to weaker risky assets and notably GBP. It is unlikely to change until we see clearer downward pressure on core inflation in the UK.

4. Market reaction relatively muted, but interest rate volatility isn't going anywhere

"The risk of large mark-to-market margin calls could post liquidity challenges for investors." Dr Michelle Teng, PGIM Institutional Advisory and Solutions Group

Whilst UK DB schemes will see liabilities fall, the recent LDI shock showed that rising rates are not always plain sailing. Many UK pension schemes have been negotiating the challenges of rising rates through tough lessons learned, but a recession (particularly global one) would bring yet more obstacles. The requirement to raise additional cash for risk rebalancing or to meet redemption requirements from nervous investors only highlights the need for a closer look at fund liquidity monitoring and management. In the current landscape, one might ask: 'Is There a Need for a Chief Liquidity Officer?'

5. Whilst low transaction volume and occupier stress is apparent, real estate opportunities exist both short and long term

"The disconnect between high borrowing costs, capital shortages and downward pressure on values in the near term, and a positive view of the long-term fundamentals for real estate will eventually drive investment opportunities. Our long-term view on pricing is relatively unaffected." Greg Kane, Head of European Investment Research, PGIM Real Estate

The effects of recent policy rate hikes are greatest in the near term. Transaction volume has been very low for several quarters, and a further rise in borrowing costs is set to exacerbate shortages of available debt and equity capital. Meanwhile, growing risks to the occupier outlook are putting additional downward pressure on values. In the current landscape, it's important to look for investment opportunities in parts of the market where repricing has progressed significantly and where demand growth is most resilient, driven by supportive structural trends. This includes logistics, data centres and living strategies such as affordable housing, senior living and student accommodation.

CIO Pulse

"Aggressive rate rises increase the risk of a hard landing for the UK economy. This in turn raises the risk of higher volatility for UK yields and Sterling. Risk protection becomes even more relevant; successful management of portfolios will need strong liquidity management both for defensive reasons and to be able to react to market opportunities." Cliff Speed, Chief Investment Officer, TPT Retirement Solutions