Investors piled into bets on the BoE keeping Bank Rate at 5.25%.
The BoE is alarmed that wages have so far defied the slowdown in the broader economy and are rising at a record pace.
Goldman Sachs and other banks ditched their previous calls for one more rate increase and investors put a roughly 50% chance on a pause by the BoE, up from just 20% on Tuesday. BoE governor Andrew Bailey and his colleagues on the Monetary Policy Committee have faced intense criticism after consumer price inflation surpassed 11% in October last year.
Whether it raises rates one more time or not, the challenge for the BoE is likely to be to convince investors that it will stick to its guns and not rush to cut rates even as Britain’s already fragile economy shows signs of weakening. British inflation is almost double the rate in the United States, where the Federal Reserve on Wednesday kept borrowing costs on hold.
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