The Bank of England will raise interest rates to 5.75pc by the end of the year, traders are betting, as wages surged at their fastest pace on record outside of the pandemic.
Markets have fully priced in interest rates to rise over the Monetary Policy Committee’s next three meetings by 0.25 percentage points from their current level of 4.5pc.
Now traders are also increasing bets on the Bank raising rates by the same amount at the following two meetings in November and December, delivering a blow to mortgage payers.
If the rises come to pass, that would take borrowing costs to their highest level since November 2007.
It comes as the latest data from the Office for National Statistics showed regular pay excluding bonuses increased by 7.2pc in the three months to April, while employment levels also hit a new record.
The Bank of England looks to wage growth as an indicator of how embedded inflation is becoming in the economy despite the initial shock from the energy crisis subsiding.
Hussain Mehdi, macro & investment strategist at HSBC Asset Management, said: “For the Bank of England, wage growth is a big problem – it is simply at too high a level to allow inflation to hit the 2pc target.”
Emma Mogford, fund manager at Premier Miton Investors, said: “The labour market remains surprisingly tight with unemployment falling and wage inflation increasing. While broadly good news for the UK economy, this is very challenging for the Bank of England.
“It may mean interest rates have to stay higher for longer to bring inflation back to normal levels.”
Read the latest updates below.
https://news.google.com/rss/articles/CBMibGh0dHBzOi8vd3d3LnRlbGVncmFwaC5jby51ay9idXNpbmVzcy8yMDIzLzA2LzEzL2Z0c2UtMTAwLW1hcmtldHMtbmV3cy1saXZlLW9ucy1lbXBsb3ltZW50LWZpZ3VyZXMtaW5mbGF0aW9uL9IBAA?oc=5
2023-06-13 08:44:40Z
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