Bank of England to hike interest rates to 5.5 per cent to tame scorching inflation
CITY AM says The Bank of England will have to hike interest rates to a peak of 5.5 per cent, threatening to tip the UK economy to near a recession to tame steaming inflation, markets have priced in today, after fresh numbers showed price pressures are withstanding prior rate rises.
Upward moves in financial markets’ expectations for peak UK interest rates were triggered by numbers from the Office for National Statistics (ONS) this morning revealing inflation is still smashing experts’ forecasts.
Headline inflation – measured by the consumer price index – slipped out of the double digits for the first time since last August to 8.7 per cent in April, its lowest level in more than a year and down from 10.1 per cent.
That figure topped City analysts’ expectations of a drop to 8.2 per cent and the Bank of England’s prediction it would fall to 8.4 per cent.
However, markets took fright at the underlying inflation numbers within ONS’s research. The yield on the 2-year gilt jumped 25 basis points and the FTSE 100 slumped 1.5 per cent. The pound rose slightly against the US dollar. Gilt prices and yields move inversely.
