BoE Rate Hikes Loom as Oil Prices Test Inflation Assumptions

The Bank of England is set to make a crucial decision on interest rates this week, with investors expecting borrowing costs to stay at 3.75%.

However, market participants are increasingly pricing in rate hikes later this year due to rising inflation risks, driven by surging oil prices above $100.

The Monetary Policy Committee is expected to hold a 6-3 vote to keep rates unchanged, but a narrower split of 5-4 or even a surprise increase cannot be ruled out.

Swaps markets now price in four quarter-point Bank of England rate hikes by September 2025, up from two or three anticipated earlier in June.