Bank of England expected to raise interest rates to new 15-year high to fight inflation – business live
Introduction: Bank of England sets interest rates today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The Bank of England finds itself on the horns of dilemma this week, as it sets UK interest rates.
Should it pause its cycle of interest rate rises, and risk inflation racing out of control? Or should it keep raising them, despite signs that the economy is teetering close to a recession?
And if it plumps for a hike, how sharp should it be?
We’ll find out at noon, and get the reasoning for the decision from the BoE governor, Andrew Bailey, 30 minutes later.
City economists believe the Bank is nailed on to raise borrowing costs for the 14th time in a row, to the highest since 2008.
The money markets suggests a small, quarter-point increase is most likely, from 5% to 5.25%, but a larger, half-point rise to 5.5% can’t be ruled out.
Kim Crawford, global rates portfolio manager at JP Morgan Asset Management (JPMAM), predicts a 25bp hike to 5.25%, but warns it won’t be the last BoE rate rise….
Crawford says:
“There has been some relief that inflation hasn’t gotten worse, but there is still a lot of progress that needs to be made.
The level of wage growth and services inflation is still high, and the labour market remains tight.
The Bank has been urged not to do this, though. Yesterday, the TUC said it should hold borrowing costs unchanged, as the UK was “teetering on the brink of recession”.