Traders betting on interest rate rise as oil price spirals

TRADERS are speculating on interest rate hikes this year, as Rachel Reeves and Sir Keir Starmer consult analysts at the Bank of England to monitor the impact of spiralling oil prices on the UK economy.

- Mauricio ALENCAR @reachplc.com

Investors believe interest rates are more likely to rise than fall by the end of the year, with a near-40% chance of a hike being priced in.

On the whole, market data suggests analysts believe that interest rates will be left on hold for the rest of the year.

While the implied rate by the end of the year - the calculation resulting from trading bets on interest rate - is currently slightly above the current 3.75% base rate, it is not high enough to suggest that a majority of investors believe interest rates will be raised.

The escalation of the conflict in the Middle East over the weekend and the continued disruption of trade across the Strait of Hormuz, through which around 20% of global crude oil stocks pass, has raised alarm across the City and the government.