Interest rates look likely to more than double by next spring as the Bank of England steps up its fight against inflation.
Financial markets are betting that rates will rise from 1.75 per cent today to 4 per cent in May – driving up borrowing costs for households and businesses.
Interest rates were just 0.1 per cent as recently as December but have been steadily rising since then in a bid to bring runaway inflation back under control.
Trouble ahead: Financial markets are betting the Bank of England will hike Interest rates from 1.75% today to 4% in May – driving up borrowing costs for households and businesses
Inflation in the UK stands at a 40-year high of 10.1 per cent but analyst at investment bank Citi this week warned it could hit 18.6 per cent next year as energy bills soar.
However, economists warn the financial markets may have got ahead of themselves, and rates might not rise as far or as fast.
Paul Dales, chief UK economist at Capital Economics, said it expects rates to rise to 3 per cent.
But he said: ‘At this stage I wouldn’t really want to rule anything out – 4 per cent isn’t completely implausible any more.’
Interest rates in the UK have not been that high since 2008 as the financial crisis struck.
