Sterling rises as markets price more Bank of England hikes
Sterling edged up to $1.354 as renewed inflation concerns lifted expectations for further BoE rate hikes. Markets are fully pricing a 25-basis-point increase by December, with two more hikes in 2027.
354 as renewed inflation concerns bolstered expectations for more Bank of England rate increases. Brent crude briefly touched $100 a barrel, while UK natural gas prices climbed to their highest level since late 2022 as escalating tensions in the Middle East stoked worries over energy supplies. Markets are fully pricing in a 25-basis-point BoE rate increase by December, followed by two further hikes in 2027. For the September 17 meeting, policymakers are widely expected to leave interest rates unchanged.
Speaking to lawmakers in Parliament on Tuesday, BoE Governor Andrew Bailey rejected the view that another rate increase is simply a matter of time, saying future decisions would depend on evolving economic and geopolitical developments. MPC member Megan Greene, who voted for a rate hike in July, warned that a prolonged oil-price shock could make inflation expectations more persistent.