BoE Expected to Hold Rates Steady Amid Oil Price Surge

The Bank of England is expected to keep interest rates steady this week despite rising oil prices and concerns about inflation. Policymakers are also likely to slow down the pace of quantitative tightening, which is the process of unwinding the central bank's bond-buying programme.

Financial markets now price a 30% chance of a quarter-point BoE rate hike this week, up from less than 10% last week. Long-dated UK gilt prices hit 25-year lows last week, prompting Deutsche Bank to forecast that the BoE will halt sales of long-dated gilts entirely.

Deputy Governor Dave Ramsden says BoE research suggests quantitative tightening has pushed gilt yields up by a cumulative 25 basis points. However, analysts differ on the scale of the effect, with Morgan Stanley's Fabio Bassanin saying the impact may be closer to 70 basis points for long-dated debt.