The Bank of England is poised to hike interest rates again this week – but experts say the peak in borrowing costs could be in sight.
Traders expect the benchmark lending rate to rise half a point to 3.5 per cent, the ninth rise in a year. The central Bank hopes that will help curb runaway inflation, currently 11.1 per cent.
On the up: Traders expect the benchmark lending rate to rise half a point to 3.5 per cent
Bank of England chief economist and rate-setter Huw Pill recently said the central bank had ‘more to do’ to tame inflation. But financial markets expect the price spiral to tail off next year, reducing the need for further hikes in borrowing costs.
The fragility of the housing market is also putting pressure on the Bank to cool rate rises.
Philip Shaw, at investment bank Investec, expects rates to peak at 4 per cent in March and start falling in the second half of next year ‘to support the economy’.
House prices have fallen for three months running amid fears they could drop by a fifth if the recession is longer and deeper than expected.
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