2023-07-06 10:56:49
The market expected the Bank of England’s (British Central Bank) terminal rate to rise to the highest level in a quarter of a century. Traders have questioned the Bank of England’s ability to keep inflation under control without slowing the economy.
Money markets have fully priced in the terminal rate reaching over 6.5% next March, according to swap rate movements linked to the Bank of England’s policy announcement schedule. A rate of 6.5% by the Bank of England would be the highest since 1998. Short-term money markets expect peak interest rates to peak at just 5% just a few months ago.
BOE Interest Rates Are Set To Rise Above 6.5% Next Year
Money markets have cranked up wagers for six straight days
Source: Bloomberg
Bank of England Governor Bailey said in an interview with CBBC aired on Wednesday that inflation was still “too high”. He also said there were signs of so-called “greedflation,” in which companies take advantage of higher prices to raise prices even further.
But he also said he expected inflation to slow sharply in 2020, with inflation falling to the Bank of England’s 2% target by the end of next year.
“The pace of inflation has already started to decelerate. I also gave my thoughts.
JPMorgan Chase & Co. economist Alan Monks said the Bank of England would be forced to raise interest rates to 7%, risking a “hard landing” for the economy. Schroeders also predicted that the BoE would prioritize fighting inflation over growth, raising interest rates to 6.5%.
Evelyn Gomeslichti of Mizuho International said the “lack of rate guidance from the Bank of England and uncertainty about the trajectory of inflation” will make traders reluctant to take positions where rates will not rise.
The yield on 10-year British bonds surged 10 basis points to 4.59% in Thursday’s trading, the highest since October last year.
Original title:Traders Bet UK Rates Are Heading to the Highest Since 1998
BOE Governor Sees Some Evidence of Overcharging for Fuel in UK
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