While inflation remains high, traders are now uncertain if Bank of England and US Federal Reserve will hike rates – and how much
Central banks on both sides of the Atlantic are facing one of the toughest calls on interest rates in years, as concerns over the worst banking crisis since 2008 cast doubt on the need for further action to reduce sky-high inflation.to raise its main rate by 0.25 percentage points on Wednesday, down from predictions just two weeks ago for the US’s central bank to increase borrowing costs by twice that amount.
Trading in financial markets suggests an almost 50-50 chance that the UK central bank leaves interest rates on hold, which would bring to a standstill one of the most aggressive assaults on inflation for decades after 10 successive rate hikes since December 2021. “These events put central banks in an even tougher spot now,” said CJ Cowan, a portfolio manager at Quilter Investors. “Financial stability concerns have resurfaced but inflation still remains uncomfortably high and is showing signs that it won’t fall as far or as fast as hoped.”
Some economists said the Fed should keep interest rates on hold, while David Blanchflower, a member of the Bank’s monetary policy committee during the 2008 financial crisis,
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