Bank of England faces 'difficult balancing act' over inflation and banking turmoil
Economists and investors anticipate the Bank of England will raise interest rates a quarter of a percentage point to 4.25pc later.
That is despite calls for a pause in the tightening to ease turmoil in financial markets after soaring rates unsettled the banking system.
Sonja Laud, chief investment officer at Legal & General, told BBC Radio 4's Today programme:
It is a difficult balancing act. All throughout 2022 we have realised that central banks were quite slow initially and then accelerated the speed of rate hikes because they witnessed a dramatic increase in inflationary pressures.
I think it is the broadening of inflationary pressures that is now worrying them and it is a balancing act.
It is about arresting structural inflationary forces verses slowing down the economy too much.
And it is trying to judge - particularly [amid] the financial stresses that have emerged over the past two weeks - how much they will slow down the economy and how much more they have to raise interest rates in order to facilitate this.
This is painful because it will hit consumers across all the affective areas but at the end of the day it is about the balancing act.
They will do everything and all central banks have been clear in their communication that they will do everything to arrest long term inflationary pressures in order to restore price stability.
Good morning
The Bank of England faces a "difficult balancing act" as it makes its next decision on interest rates at lunchtime, according to analysts.
Its Monetary Policy Committee is likely to continue the quickest series of interest-rate increases in three decades to quell a inflation that accelerated in February.
However, Sonja Laud, chief investment officer at Legal & General, warned that the efforts to slow down the economy will likely lead to more banks failing as "the weakest links are flushed to the surface first"..
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What happened overnight
Asian markets mostly rose and the dollar retreated, brushing off a Wall Street retreat on hopes the Federal Reserve's latest interest rate rise would be one of its last.
Hong Kong led gains, adding more than 1pc thanks to a rally in tech firms, while Shanghai, Seoul, Taipei, Mumbai, Bangkok and Wellington were also up.
The gains came even as bank chief Jerome Powell dealt a blow to hopes it could cut borrowing costs later in the year to soothe banking sector fears.
In a widely expected move, the Fed raised interest rates by 25 basis points but recast its outlook to a more cautious stance as a result of the banking stress.
Sydney, Singapore and Manila slipped. In Japan, stocks ended lower Thursday, tracking losses on Wall Street.
The benchmark Nikkei 225 index fell 0.2pc to 27,419.61, while the broader Topix index fell 0.3pc to 1,957.32.
Wall Street stocks sank after the Federal Reserve increased interest rates 0.25 percentage points in line with market expectations.
The Dow Jones Industrial Average shed 530.49 points, closing down at 1.6pc at 32,030.11.
The broad-based S&P 500 declined 1.7pc to 3,936.97, while the Nasdaq Composite tumbled 1.6pc to 11,669.96.
In particular, shares in US lenders plummeted after the Federal Reserved warned of tighter lending conditions following recent bank failures and the Treasury Secretary ruled out blanket deposit insurance.
The S&P 500 Banks Industry Group Index dropped 3.7pc to 277.44.
Meanwhile, US Treasury yields slightly retreated as interest rates rose. The two-year yield dropped to 3.96pc, while the benchmark 10-year yield dipped to 3.46pc.
Across the Atlantic, the pound surged against the weak dollar, climbing to a seven week high of $1.23.