Bank of England prepares for rate hike

Expectations have risen for the Bank of England to raise policy rates before the end of the year to curb rising inflation.

Earlier in the week, the messages of the Governor of the Bank of England Andrew Bailey at an online panel organized by the G30 Group caused the markets to increase the interest rate hike expectations for the central bank.

BAILEY'S SPEECH HIGHER EXPECTATIONS OF INTEREST RISE

Stating that the bank's monetary policy cannot solve the supply-side problems, Bailey said, "However, if the bank sees a risk regarding medium-term inflation and medium-term inflation expectations, it must and should act." His statement was interpreted as a possible interest rate hike may come sooner than expected.

Therefore, with the effect of the statements, 2-year bond yields in the country increased by 12 basis points and 5-year bond yields increased by 8 basis points on Monday. Goldman Sachs and JP Morgan also expect the bank to raise interest rates by 25 basis points before the end of the year following the announcement.

ENGLAND INFLATION TARGET 2 PERCENT

The Bank of England, which has a target level of 2 percent in inflation, expects inflation to exceed 4 percent by the end of this year.

The Bank of England currently keeps the policy rate at 0.1%.

Experts say that the Bank of England may be the first central bank to increase interest rates among advanced economies by taking action this year or at the beginning of 2022.