Investors have scaled back their bets on a rate hike by the Bank of England
Investors have scaled back their bets on a rate hike by the Bank of England
Investors are scaling back expectations that interest rates will rise again this month, offering the prospect of some reprieve for millions of borrowers.
According to money markets, there is a 30 percent chance that rates will be frozen at 5.25 percent when the Bank of England announces its latest decision on September 21.
Until recently, a new increase to 5.5 percent was considered almost certain. While such a move is still seen as likely, investors are lowering their bets after the Bank’s governor, Andrew Bailey, said this week that Britain was “much closer” to the peak.
Decision point: Bank of England governor Andrew Bailey said Britain is ‘much closer’ to peak interest rates
Coming data on wage growth and inflation are likely to be key to the Bank’s decision.
But hopes are growing that interest rates will be at or near their peak, having risen sharply from 0.1 percent to 5.25 percent since December last year.
That has pushed up mortgage rates and the cost of corporate and other loans, slowing the economy while pushing down inflation.
The European Central Bank, meanwhile, could also hit the pause button next week after raising eurozone interest rates from negative territory to 3.75 percent over the past year.
The increasing likelihood that interest rates will not rise in Britain or Europe has helped the US dollar post gains for eight weeks in a row, its longest winning streak in nine years.
Sterling has fallen by around 5 percent in that time, from $1.31 to less than $1.25, while the euro has fallen against the dollar from €1.12 to €1.07.