The Bank of England is gearing up to raise interest rates again today amid inflation woes that are heaping pressure on the cost of living in the UK.
This is despite Threadneedle Street increasing rates four times since December as costs spiral upwards.
The Times reported that with UK inflation on course to hit double digits later this year markets are pricing at 100 per cent the probability of the Bank’s monetary policy committee raising the bank rate from 1 per cent to 1.25 per cent after the conclusion of today’s rate setting meeting.
It comes as the initial market reaction to the largest rate hike by the US Federal Reserve in nearly 30 years was a sigh of relief.
AJ Bell investment director Russ Mould said: “After last week’s US inflation shock the market had steeled itself for a big rise. Although the extent of the hike was so widely predicted ahead of time that you could be forgiven for suspecting possible leaking to help manage expectations.
“If so, job done as stocks bounced on the decision. It helped that the move was accompanied by some soothing words from Fed chair Jerome Powell, who characterised the size of the hike as unusual and not something he expected to make a habit of.
“He also did his best to allay fears of a recession. Although the predictive powers of Powell and his team have rather lost their credibility given how long they stuck with the line that inflation was transitory rather than something which was here to stay.
“And perhaps it was this lingering concern over a global downturn which helped put pressure on the FTSE 100 this morning.
“Investors will find out later today if the Fed’s action will put any pressure on the Bank of England to follow suit with a firmer move than 0.25% increase which is widely expected. The Bank has to contend with a more fragile economic backdrop than the Fed but today’s news from an industry body that UK food prices are set to surge 15% is another indication of just how acute inflationary pressures are.”
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