The interest rate debate

Is the Bank of England’s apparent volte-face on inflation justified?

Clouds over the City: is there trouble ahead?
Clouds over the City: is there trouble ahead?
(Image credit: Dan Kitwood/Getty Images)

Economists at Bank of America are not doing much “to crank up the Christmas cheer”, said Alistair Osborne in The Times. Having noted the “more hawkish tone over inflation” coming out of the Bank of England (BoE), they’re forecasting a hike to 0.25% in December (from 0.1% now) followed by a further quarter-point rise next February. The City’s bond traders are on the same page. Yields on UK government bonds (gilts) – which tend to mirror interest rate expectations – climbed to “a two-and-a-half-year high” of 1.19% this week. Even if BoE governor Andrew Bailey wants to hold fire, he “may struggle to resist the markets’ push for movin’ on up”.

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