Investors scale back bets on Bank hiking interest rates again

Investors are scaling back bets that interest rates will rise again this month – offering the prospect of some respite to millions of borrowers.

According to the money markets, there is a 30 per cent chance rates will be frozen at 5.25 per cent when the Bank of England announces its latest decision on September 21.

Until recently, another hike to 5.5 per cent was seen as all but certain. While such a move is still seen as likely, investors are trimming their bets after the Bank’s governor Andrew Bailey this week said the UK was ‘much nearer’ to the peak.

Upcoming data on wage growth and inflation are likely to be crucial to the decision the Bank makes.

But hopes are rising that rates are at or close to their peak having risen sharply from 0.1 per cent to 5.25 per cent since December last year.

That has pushed up the cost of mortgages, corporate borrowing and other loans, holding back the economy at the same time as bearing down on inflation.

The European Central Bank, meanwhile, could also hit the pause button next week having raised rates in the eurozone from negative territory to 3.75 per cent over the past year.

The rising chance that rates will not rise in the UK or Europe has seen the US dollar make gains for eight weeks in a row in its longest winning streak for nine years.

Sterling has fallen around 5 per cent in that time, from $1.31 to below $1.25, while the euro is down from €1.12 to €1.07.