Markets have started to price in a lower peak for borrowing costs after the Bank of England signalled that the cycle of interest rate increases could be nearing an end.
The base rate was raised by 0.25 percentage points to a 15-year high of 5.25% yesterday as the bank battles to contain inflation.
Despite the 14th consecutive rate rise since late 2021, traders seized on signs that the top of the rate cycle may be closer than previously expected. Markets are now pricing in a peak of about 5.75%, having previously bet on rates rising above 6%.
It came as the bank signalled that rates will need to stay higher for longer to push inflation, which stood at 7.9% in June, towards its target of 2%.
The chancellor said Britain was stuck in a “low-growth trap” after official figures showed the nation faced a sustained period of high interest rates before the next general election.
