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The Bank of England May Be More Aggressive in Tightening Policy Due to High Inflation
A Reuters poll showed the Bank of England to be more aggressive in tightening policy than previously thought in previously, as it struggles to contain the rise in inflation, which is the highest jointly among the G7 advanced economies.
Inflation Rates in the UK
Official data showed consumer prices rose 8.7% year on year last month, in down from 10.1% in March, but faster than 8.2% expected in a Reuters poll, while the core price hikes index jumped to its highest level in 31 years. before conducting the survey.
Market Response to Rising Inflation
UK government bond prices fell in the days following the release of the data as investor expectations rose that inflation would force the Bank of England to continue raising interest rates, while lenders lenders withdrew money from lending transactions.
Expectations for Interest Rates
While markets are pricing interest rates at a peak of 5.50%, the median forecast of the survey, conducted May 25-31, was that interest rates were 25 basis points higher than current levels as of 4, 75% after the June 22 meeting and a maximum of 5.00% by the end of the third quarter.
Mary Policy Committee’s Response to Inflation
Against this backdrop, Jonathan Haskell, a member of the Mary Policy Committee, said last week that the Bank may need to raise interest rates further.
Since December 2021, the bank has made 12 consecutive hikes, adding 4.4 percentage points, the biggest increase since 1989.