Bank of England is expected to raise interest rates by quarter-point since it gained operational independence in 1997, but markets now price in a 98% chance of a total 75 basis points of tightening by May's meeting.
Just a few weeks ago in late January, financial markets did not expect rates to reach 1.25% until the end of 2022, and a little over a year ago - before inflation surged - markets expected the BoE to cut rates below zero. Financial markets now expect the Bank of England's Monetary Policy Committee to raise interest rates by an unprecedented half a percentage point at its March or May meeting, and to make a quarter-point rise at the other.
British two-year government bond yields, which are sensitive to speculation about BoE rate decisions, climbed by around five basis points on Friday to a peak of 1.414%, their highest since 2011. The BoE has said it will stop reinvesting the proceeds of gilts which mature from its 875 billion-pound quantitative easing stockpile, placing extra pressure on gilt yields. It reiterated last week that it would consider actively selling gilts once bank rate reaches at least 1%.
