Summary

• Political turmoil is driving up UK borrowing costs as investors start to price even higher interest rates, on expectations of looser fiscal policy.
• Yet, the case for rate rises is far from clear-cut.
• We expect a one-and-done hike in June.

By James Smith, Developed Markets Economist, UK

Political drama is once again driving up UK borrowing costs

Financial markets have responded to renewed UK political turmoil by ramping up bets on Bank of