Inflation in the UK continues to rise, making another rate hike by the central bank likely. Goods and services cost 10.4 percent more in February than a year earlier, according to the statistics office. Economists had expected a decline to 9.9 percent – after 10.1 percent in January. A 41-year high of 11.1 percent was reached in October 2022. The Bank of England (BoE) has attempted to lower inflation with a series of rate hikes. Despite the turbulence in the global banking sector that has still not been overcome, given the high inflation, it could follow up on Thursday with an eleventh hike and raise the key interest rate from 4.00 to 4.25 percent.
“The inflation data definitely increases the likelihood that we will see a rate hike tomorrow. It was a very high number,” said FX strategist Francesco Pesole of bank ING. The expectation that the currency guardians around BoE boss Andrew Bailey will probably not agree to a pause can also be seen on the money markets. There, the probability of a rate hike by a quarter of a percentage point was estimated at 93 percent. On Tuesday, the chances of this were estimated at 57 percent.
But the central bank’s decision is likely to be controversial internally: economists surveyed by Reuters assume that interest rates will rise to 4.25 percent. But at the same time they expect that it will be a majority decision, with the proponents winning by six votes to three.