2023-06-19 12:04:57
By Le Figaro with AFP
Posted 22 minutes ago, Just Updated
The Bank of England (BoE) might operate new tightening. DANIEL LEAL / AFP
The yield on two-year British government bonds rose to more than 5% on Monday, a 15-year high, evidence that the market expects persistent inflation to force the Bank of England (BoE) to new turns of the screw. The soaring cost of borrowing in the UK is weighing on government finances, but is also pushing up loan rates for businesses and individuals.
Read alsoBritish economic activity rebounds in April (+0.2%)
Inflation still too high
Unlike September’s surge in the cost of debt, prompted by ultra-expensive government budget announcements, the rise in yields in recent months has been due to the rise in key rates from the BoE, which seeks to contain the inflation. While British inflation fell back below 10% in April, it remains well above the BoE’s 2% target, which is expected to raise its key rate for the 13th consecutive time on Thursday, to 4.75%, according to analysts’ expectations.
Inflation figures for May, published on Wednesday, might influence the BoE’s decision, however. “The economic consensus is for a deceleration from 8.7% to 8.5% but in the event of a higher than expected result, expectations of a larger rate hike might strengthen“Warns Guillaume Dejean, analyst at Convera.
In the longer term, markets anticipate that central bank rates might reach 5.75%. “This will affect owners who have a variable rate loan, whose monthly payments will increase further, which will weigh on their purchasing power.“comments Susannah Streeter, analyst at Hargreaves Lansdown.
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