Home / Business and Economy / Oil Prices Stoke Inflation Fears, Delaying UK Rate Cut
Oil Prices Stoke Inflation Fears, Delaying UK Rate Cut
3 Mar
Summary
- Inflation fears caused by high oil prices have reduced the chance of a UK rate cut.
- The probability of a Bank of England rate cut on March 19 has fallen to 50%.
- Mortgage approvals in January were the lowest in two years, falling to 59,999.
Investor confidence in further UK interest rate cuts has been significantly undermined by a recent surge in oil and gas prices. This inflationary pressure has caused financial markets to drastically reduce their expectations for a rate cut by the Bank of England's monetary policy committee.
As of March 19, financial markets now price in only a 50% chance of a rate reduction, a sharp decline from last week's 80% probability. This shift has led to a rise in borrowing costs, with the ten-year gilt yield nearing 4.4%.
The prospect of sustained higher interest rates poses a challenge for the UK housing market. Bank of England data revealed that mortgage approvals for house purchases in January were 59,999, the lowest figure in two years. This economic uncertainty, lingering since the November budget, contributes to subdued lending activity.
