Interest rate now 50:50 to be raised after inflation falls, but BoE ‘still need to balance their objectives’

Markets expert William Marsters, of investment platform Saxo, has said there is now a 50% chance of an interest rate hike, down from predictions of around 80% prior to today’s announcement. He’s said while it will be welcome news for many, the BoE still must ‘balance their objectives’.

William Marsters of Saxo said, “The pound weakened this morning following UK inflation numbers that were not only softer than expected but also below the previous month’s figures. Headline year-on-year CPI (Consumer Price Index) came in at 6.7% vs the expected 7%. While core year-on-year was in at 6.2% vs the expected 6.8%.

“The Sterling fell as traders reprice the chances of Bank of England’s interest rate hike tomorrow. Yesterday, markets were pricing around a 80% probability for the Bank of England to hike rates by a further 0.25%. After today’s surprise inflation numbers, this probability has dropped to a near 50:50 chance of hike vs no hike.

“The unexpected drop in inflation will certainly be welcome news to investors, households, and the government. But the Bank of England will still need to balance their objectives, and not let one print dictate policy. We must remember that UK inflation remains the highest across the G7 economies.”