On June 21, traders ramped up bets on further rate hikes from the Bank of England, pricing in the benchmark rate to levels not seen since the turn of the century, following shocking inflation data.
Traders now expect the Bank of England’s key rate to hit 6% by December, implying another 150 basis points of rate hikes this year.
That could trigger a fresh sell-off when gilts open at 8 a.m. in London. Institutions expect the Bank of England to raise interest rates by 25 basis points to 4.75% on Thursday, although the risk of a 50 basis point hike is increasing.
Raphael Gallardo, chief economist at Carmignac Gestion SA, said: “The situation in the U.K. is worse than in Europe and the U.S., and the risk of unanchoring inflation expectations is highest in the developed world. The Bank of England must keep raising rates.”