The Bank of England will announce on Thursday whether it is halting a run of interest rate hikes that stretches back to December 2021, a day after signs that it had turned a corner in tackling Britain's high inflation problem. Investors piled into bets on the BoE keeping Bank Rate at 5.25% on Wednesday as soon as official data showed a surprise fall in the pace of price growth. Goldman Sachs and other banks ditched their previous calls for one more rate increase and investors put a roughly 50% chance on a pause by the BoE, up from just 20% on Tuesday.
LONDON - The Bank of England will announce on Thursday whether it is halting a run of interest rate hikes that stretches back to December 2021, a day after signs that it had turned a corner in tackling Britain's high inflation problem.
Other analysts said they still thought a final BoE rate hike was the most likely outcome after a recent jump in global oil prices, but they stressed it could go either way. At 6.7% in August, inflation is falling towards the 5% level that the BoE predicts for the coming months - and which British Prime Minister Rishi Sunak has promised to voters ahead of an election expected next year.
"While the BoE will no doubt try to project a 'higher for longer' message, as the ECB has since its rate hike last week, history tells us that once the peak is in, forward rates move notably lower," Dominic Bunning, head of European FX Research at HSBC, said in a note to clients.The BoE is alarmed that wages have so far defied the slowdown in the broader economy and are rising at a record pace, threatening to thwart its attempts to bring inflation down.
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