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2026-05-27 20:51:45
[Bank of England Rate Hike Expectations Halved to Only One This Year; Oil Price Crash and Declining Inflation Make July Action Only 50% Possible] ⑴ Due to falling oil prices and declining inflation expectations, the money market is currently betting that the Bank of England will only raise interest rates once this year. The cumulative rate hike expectation by the end of the year is 36 basis points, the lowest level in over a month, equivalent to a 25 basis point hike, with the probability of another rate hike now less than 50%. ⑵ Just two weeks ago, the market widely expected the Bank of England to raise interest rates twice this year; and in the weeks following the US and Israel's attacks on Iran, market expectations even reached as high as four rate hikes. Currently, traders believe there is about a 50% probability that the first rate hike will occur in July. ⑶ Because the UK is highly dependent on imported energy, its economy is extremely vulnerable to the impact of war. Traders expect that a swift end to the conflict would help further alleviate the pressure on the economy. Bank of England Governor Bailey stated last week that UK inflation expectations have not "decoupled," following data showing that price growth in April had slowed to its lowest level in over a year.
