Bank of England Faces Dilemma as Inflation and Labor Market Heat Up

The Bank of England's Monetary Policy Committee is expected to hike interest rates by at least 25 basis points on Thursday, with a 27% chance of a 50 bps hike. Despite a welcomed move lower in headline inflation, widespread price pressures observed in the services sector and upward trending salary growth must come down. The issue of rising mortgage repayments was the subject of debate in the House of Commons, but hiking interest rates remains the Bank's most effective tool in calming rampant inflation. The pound sterling has enjoyed a sizeable rise against the US dollar in recent times as markets appear to be overestimating the extent of BoE hiking.