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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%.
