Interest rates unlikely to reach 4.75% by next summer, say City economists
Source: The Guardian ·
Experts say Bank of England unlikely to increase rates by full percentage point – and could lower them by end of 2027Financial markets are wrong to predict the Bank of England will raise UK interest rates by a full percentage point or more by next summer, City economists believe.According to market-implied interest rate expectations, the Bank is likely to raise interest rates at least four times…
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Financial markets are wrong to predict the Bank of England will raise UK interest rates by a full percentage point or more by next summer, City economists believe. According to market-implied interest rate expectations, the Bank is likely to raise interest rates at least four times over the next year, lifting the bank rate from 3.75% today to 4.75% by the end of July, and possibly to 5% – meaning five rises – by December 2027. But a number of City experts believe such a sharp tightening cycle is unlikely, given there is little sign that the rise in energy costs is pushing up other prices sharply. “If you look at the swaps market, and you look at what’s priced in for the Bank of England, you’ve got four rate hikes and then no cuts ever. And I think you’d be hard-pressed to find anybody that really agrees with that,” said James Smith, a developed markets economist at the Dutch bank ING. “By next spring, I think they [the Bank] could be sounding the all clear, and by the end of next…