Investors are reducing their bets on the bank raising interest rates again
Investors are withdrawing their bets that interest rates will rise again this month – giving millions of borrowers some breathing room.
According to money markets, there is a 30 percent chance that interest rates will be frozen at 5.25 percent when the Bank of England announces its latest decision on September 21.
Until recently, a further increase to 5.5 percent was considered almost certain. Although such a move is still seen as likely, investors are reducing their bets after the bank’s governor, Andrew Bailey, said this week that Britain was “much closer” to the peak.
Upcoming data on wage growth and inflation are likely to be crucial to the bank’s decision.
However, hopes are growing that interest rates are at or near their peak, after rising sharply from 0.1 percent to 5.25 percent since December last year.
Timing of decision: Bank of England Governor Andrew Bailey said the UK was “much closer” to the peak in interest rates
This has caused the cost of mortgages, business loans and other loans to rise, slowing the economy while pushing down inflation.
The European Central Bank could also hit the pause button next week after raising euro zone interest rates from negative territory to 3.75 percent last year.
The increasing likelihood that interest rates in Britain or Europe will not rise has led to the US dollar gaining eight straight weeks in its longest winning streak in nine years.
The pound sterling has fallen by around 5 percent during this time, from US$1.31 to below US$1.25, while the euro has fallen from EUR1.12 to EUR1.07.