Traders Lift Bets On BOE Hiking Interest Rate To 6.5% By March

(Bloomberg) -- Traders are betting the Bank of England will raise interest rates to the highest level in a quarter century next year to battle inflation, a move that risks denting growth and dealing a blow to the nation’s housing market.

Money markets are fully pricing a terminal rate of 6.5% by March, according to interest-rate swaps tied to policy-meeting dates. That would be the highest since 1998 and compares with wagers on a 5% peak just a couple of months ago.

Policymakers have delivered 13 successive rate increases since late 2021, including an unexpected half-point hike last month. The tightening is now filtering through to the economy. On Wednesday, the UK Debt Management Office sold a gilt at the highest average yield since 2007.

Yet at 8.7%, UK inflation still remains well above the BOE’s 2% target. JPMorgan Chase & Co. economist Allan Monks said there’s a risk the BOE will have to push interest rates to as high as 7%, triggering a “hard landing” in the economy. Schroders Plc also expects policymakers to prioritize inflation over growth by raising the bank rate to 6.5%. 

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