If financial markets are right, UK interest rates will have hit 1% by next summer. That would take the Bank rate to the highest level since before the global financial crisis. And that’s on top of the Bank of England’s planned move to shrink its balance sheet when rates hit 0.5%. Economists are fairly united now that these market expectations are overdone. Unusually this pricing implies that the BoE will need to do more than the Fed to tackle rising inflation – something we think isn’t justified. Our own view is that, beyond an initial rate hike in November, the subsequent tightening process is likely to be much more ... (full story)