Bank of England set to hike rates again as inflation heads towards 10%

The Bank of England looks set to raise interest rates again as it tries to fight double-digit inflation.

After the U.S. Federal Reserve announced its interest rate hike, the big question for investors awaiting the BoE’s policy announcement in June at 9 p.m. Thursday (Australian time) is the size of the increase.

Reuters reports that financial markets are fully pricing in a quarter-percentage-point increase in the bank rate to 1.25%.

But investors put the odds of a BoE half-point hike at nearly 50%, something it hadn’t done since 1995.

The BoE has already raised borrowing costs four times since December, when it became the first of the world’s major central banks to hike rates after the coronavirus pandemic.

Britain, more than many other rich countries, faces a mixture of high inflation and no growth or recession.

Its economy is already showing signs of slowing and next year will be the weakest of the world’s major rich countries, according to forecasts by the International Monetary Fund and the Organization for Economic Co-operation and Development.

But inflation, which hit a 40-year high of 9% in April, is expected to top 10% later this year, more than five times the BoE’s 2% target, according to the central bank’s latest forecast. .