The Bank of England is expected to increase interest rates for the 11th time in a row on Thursday after an unexpected resurgence in UK inflation. Economists are pencilling in a rise to 4.25% from 4%, with the case for an increase strengthened by official figures on Wednesday revealing a surprise jump in inflation to 10.4% last month.
The noon decision also comes after the US Federal Reserve raised its key overnight interest rate by a quarter of a percentage point, despite recent turbulence in financial markets amid fears of a banking crisis. But the Bank of England faces a difficult balancing act, weighing up the need to rein in inflation with the worries over banking woes and the possibility they may start to clamp down on lending.
Shares on Wall Street tumbled sharply overnight on the Fed’s decision and its comments suggesting it does not expect to cut rates anytime soon, highlighting the fragility of stock market confidence. After three days of bounceback gains, the S&P 500 fell 1.7%, while the Dow Jones Industrial Average lost 1.6% and the Nasdaq composite dropped 1.6%.
