Investors are losing faith in the Bank of England delivering two interest-rate increases this year as UK economic data does little to suggest a full-blown tightening cycle is needed.
While a hike in May is still almost fully priced in by markets, the chances of a second in 2018 fell further on Wednesday after inflation slowed to the weakest level in a year. Traders are now assigning about a 30 percent chance of a follow-up in November, down from more than 50 percent at the start of this week and above 60 percent on the eve on the BOE’s March meeting.
A rate increase after May is now not fully priced in until June 2019, compared with February 2019 previously.
BOE policy makers, who raised the benchmark rate for the first time in a decade in November, have said that the UK needs more increases to help stop the economy overheating, with officials particularly concerned about domestically-generated inflation. Still, data this week have done little to suggest price gains are running out of control, with inflation dropping to 2.5 percent in March, and wage growth staying below 3 percent.