Your Sunday UK Briefing: A Painful Rate Hike Lies in Wait
The Bank of England.
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Hello again, and happy Sunday. Here’s what we have our eye on for the next few days.
The big hikes: The BOE and the Federal Reserve are both expected to make 75-basis-point rate hikes this week in their bid to drag down inflation. But the US economy, fresh off a positive GDP print for the third quarter, looks in better shape to absorb the shock. The BOE’s situation on Thursday is far less comfortable as it delivers what would be the biggest UK rate hike since 1989. It’s been a painful end to more than a decade of cheap money. Not only is the country already probably in a recession, with mortgage markets in full-blown crisis mode (a two-year fixed mortgage is the highest in 14 years), but officials are also furiously trying to reestablish confidence after former Prime Minister Liz Truss’s unfunded fiscal plan tanked markets. Bond traders are still gearing up for fresh volatility.