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Interest rates to double by end of 2023 as Bank fights inflation

Interest rates double by end of 2023: ‘Ugly’ inflation puts Bank of England on track to deliver multiple half-point hikes

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Interest rates are expected to more than double in the spring, after the latest inflation data raised fears that a period of price hikes will last well into the next year.

According to the Office for National Statistics, the consumer price index (CPI) of inflation rose to 10.1 percent in July, from 9.4 percent the previous month.

That was higher than the 9.8 percent forecast by economists and prompted markets to raise interest rates in the Bank of England to 3.75% by March 2023.

Interest rates to double by end of 2023 as Bank

The Bank of England has already hiked interest rates to try to cool inflation, which is at its highest level in four decades.

Andrew Sentance, a former member of the Bank of England’s interest rate committee, said it may need to raise interest rates to between 3 and 4 percent by the end of this year.

Sentance said: “The bank has been quite slow to react and clearly lagging behind in trying to cope with this rise in inflation.

“They do have tools at their disposal, especially interest rates.”

Two-year government bond yields, which are sensitive to rate hikes, have risen to their highest level since 2008, according to the latest inflation data.

The Bank has already implemented rate hikes to try to cool the rise in inflation, which is at its highest level in four decades.

An increase of half a percentage point this month was the largest since 1995 and brought the benchmark interest rate to 1.75 percent.

Even before yesterday’s inflation data, experts were counting on a half-point rise in September. The markets are now even estimating a small chance of a three-quarter point increase next month.

Britain is not alone in experiencing a surge in inflation, as the war in Ukraine drives up the cost of commodities such as oil and wheat, adding to the global supply chain problems that are already depressing prices.

But it is the first of the G7 group of advanced economies to see the price index reach double digits during the crisis.

In America, the inflation spiral may already begin to ease after it fell to 8.5 percent in July, from a four-decade high of 9.1 percent in June.

Sanjay Raja, senior economist at Deutsche Bank, said: “Inflation data was about as bad as the MPC [monetary policy committee] could have hoped.’

In America, the inflation spiral may already begin to ease after it fell to 8.5 percent in July, from a four-decade high of 9.1 percent in June.

In America, the inflation spiral may already begin to ease after it fell to 8.5 percent in July, from a four-decade high of 9.1 percent in June.

In America, the inflation spiral may already begin to ease after it fell to 8.5 percent in July, from a four-decade high of 9.1 percent in June.

He pointed to higher-than-expected rents and other housing-related prices, while spikes in food and energy costs had a knock-on effect on hospitality and leisure.

And he added that there was also “probably more to do” for the rise in food prices, which were the main driver of the inflation spike in July.

Deutsche now predicts that inflation will remain in double digits at least until late in the second quarter of 2023.

The Bank of England expects inflation to reach 13 percent by 2022 before falling back.

Raja said the “ugly” data should put the Bank’s rate setters on track to deliver multiple half-point increases this year.

The pound has been mostly boosted by the prospect of interest rate hikes, but has slipped on the latest inflation figures of nearly $1.2065 against the dollar.

Analysts said the outlook for the currency was bleak as the latest developments increased the risk of economic stagnation coupled with high inflation – or ‘stagflation’.

The Bank of England has forecast a protracted recession beginning later this year and continuing through 2023.

Viraj Patel, global macro strategist at Vanda Research, said: ‘Sterling is currently highly correlated with recession risks in the UK. The CPI print amplifies stagflationary risks in the UK.

“You wouldn’t necessarily want to keep a risky currency like sterling in a recession.”

While the Bank of England predicts inflation will exceed 13 percent in October, Chris Hare, senior economist at HSBC, said subsequent likely increases in the energy price ceiling would push it even further, to about 14 percent, in January.

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