Several City economists think financial markets overestimate how far the Bank of England will raise interest rates, The Guardian reports.
Market pricing implies at least four rises over the next year, taking the bank rate from 3.75% to 4.75% by the end of July and possibly 5% by December 2027. Economists say there is little sign that higher energy costs are feeding sharply into other prices, and that expectations have tracked oil prices since the Iran war began.
ING's James Smith said few forecasters agreed with the market path and suggested the Bank could be cutting again by late next year. Deutsche Bank's Sanjay Raja estimated that only about half a percentage point of rises is genuinely priced in once risk premia are stripped out; his bank expects rates to peak at 4.25% by February. A rise to 4% is widely expected on 5 November.
Source: The Guardian
