According to Bloomberg data, analysts believe that the UK's interest rates will hit 5.2% in August 2023, with expectations that there could be a one percentage point interest rate hike at the Bank of England's next meeting in November.
The cost of government borrowing went up on Friday, rising by near-record amounts as investors reacted to the huge tax cuts outlined by new chancellor Kwasi Kwarteng. Analysts said these would reduce government income at the same time that it is providing huge financial support to limit energy bill rises for households and firms.
They're worried that some of the tax cuts that have been announced aren't going to be fully funded. She said that it will be a large amount of debt at a time when the Bank of England is going to sell some of its holdings of UK government debt.
I think this government needs to give a lot more assurance that it does have fiscal sensibility in order. This morning, this is not the message that's come across this morning. While it should initially soothe some of the recession that is already likely to be in, the huge borrowing has sent markets reeling.
It has been one of the worst days for UK Government bonds in decades, with some of the biggest one-day hikes in the cost of borrowing since the 1990s.
The government had to tell the markets that it needed to borrow an extra 72 billion dollars this year, but did not publish the numbers behind that. Interest rates charged for British debt hit 4%, having been 3.1% earlier this week, and 1.8% at the beginning of the leadership contest with Rishi Sunak.
The Treasury's forecasts show how much tax revenue would be raised if the reforms were able to spur growth in the economy.
But that table, while an aspiration that every chancellor and every politician seeks, has not convinced the markets. It is an assumption of extra tax revenue that has replaced actual tax.
The prime minister criticised bean counters in her leadership campaign. Today's plan shows only one side of the ledger. For a chancellor making a debut, it is usual to focus on fiscal credibility.