Thursday May 15, 12:17 PM
UK interbank lending rates climb as markets scale back rate cut expectations
LONDON (Thomson Financial) - The key rate at which banks lend to each other rose across all maturities, as markets scaled back their expectations for when the Bank of England will cut interest rates following yesterday's gloomy Inflation
Report.
The three-month Libor rate climbed to 5.84 percent from 5.70 percent on yesterday.
The one-month rate rose to 5.46 percent from 5.45 percent, while the overnight contract, generally the most closely aligned to the Bank of England's (BoE) 5.00 percent benchmark rate, edged up to 5.10 percent from 5.09 percent.
Markets had been expecting that the central bank might cut rates by a quarter point to 4.75 percent next month, but these hopes have been quashed after the BoE warned in its quarterly Inflation Report on Wednesday that annual CPI (NYSE: CPY - news) inflation could reach near 4.00 percent by the autumn.
Expectations for a cut had already been dampened after Tuesday's CPI data showed annual CPI jumped to 3.0 percent in April, just below the level that would trigger BoE governor Mervyn King into writing a letter to the Chancellor of the Exchequer to explain why inflation is more than a percentage point above its 2.0 percent target.
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