The Bank of England this week hiked its key interest rate by an additional 50 basis points as it tries to quell increasing inflation. The inflation rate of 9.9% is running at a near four-decade high.
“The sell-off in UK assets reflects the sheer panic as the new government’s stimulus package will not only grow an already sizeable debt burden, potentially to unmanageable levels, but will also add to inflationary pressures,” wrote Fiona Cincotta, senior financial markets Analyst at City Index. “The BoE, which has been reluctant to hike rates aggressively, will need to roll up its sleeves and fight inflation with larger rate hikes. Expectations for a 1% hike in November are already climbing.”
UK government bond prices fell, sending yields higher, and the FTSE 100 benchmark equity index lost about 2% on Friday.
