Traders bet Bank will double rates by 2023

MARKETS are betting on the Bank of England doubling interest rates by the end of 2022 as investors brace for the biggest increase in 27 years at this week’s meeting.

Officials on Threadneedle Street are expected to vote for a rare 0.5 percentage point increase to interest rates as the Bank comes under pressure from Tory MPS to tackle rampant inflation. Worse-than-expected inflation figures and strong signals from Governor Andrew Bailey have emboldened traders to bet on the Bank boosting rates to 1.75pc at Thursday’s meeting, movements on UK rates markets suggest.

The sixth back-to-back increase will lift rates to their highest level since early 2009, pushing up mortgage rates for millions of homeowners. Investors are now bracing for interest rates to surge above 2.5pc by the end of 2022, up from 1.25pc currently.

Steffan Ball, a Goldman Sachs economist, said: “Given the strong inflation data and likely sizeable upward revision to the Bank’s growth forecast, we expect all monetary policy committee members to vote for a 50 basis point hike.”

He said “strong and broadbased” wage and price pressures and a “resilient” economic outlook will mean that the Bank takes interest rates “into contractionary territory”.

It comes as a survey reveals more than a quarter of firms are handing staff inflation-busting pay rises as bosses defy warnings from Mr Bailey in a bid to hang on to employees.