Investors reduce their bets on the Bank raising interest rates again
Investors are reducing bets that interest rates will rise again this month, offering the prospect of some respite to 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, another increase to 5.5 percent was considered almost certain. While such a move is still seen as likely, investors are trimming their bets after Bank Governor Andrew Bailey said this week the UK was “much closer” to the peak.
Upcoming data on wage growth and inflation are likely to be crucial to the Bank’s decision.
But hopes are rising that rates are at or near their peak, having risen sharply from 0.1 percent to 5.25 percent since December last year.
Decision time: Bank of England Governor Andrew Bailey said UK was ‘much closer’ to peak interest rates
That has raised the cost of mortgages, corporate loans and other loans, slowing the economy while putting pressure on inflation.
Meanwhile, the European Central Bank could also hit the pause button next week after raising rates in the eurozone from negative territory to 3.75 percent over the past year.
The increasing likelihood that rates will not rise in the UK or Europe has seen the US dollar advance for eight straight weeks in its longest winning streak in nine years.
The pound has fallen about 5 percent in that time, from $1.31 to less than $1.25, while the euro fell from €1.12 to €1.07.
