Traders bet on interest rate rise after surprising price jump

Inflation has risen to 10.4%, dealing a blow to the Bank of England ahead of its decision on the next step for interest rates tomorrow.

Policymakers have faced calls from analysts to slow the pace of interest rate hikes to ease pressure on the global banking system.

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What happened from one day to the next

Asian stocks posted a tentative rebound on Wednesday, hoping a global banking crisis would be averted and rivaling uncertainty over the outlook for US interest rates.

Turmoil caused both S&P 500 futures and Nasdaq futures to barely change. EUROSTOXX 50 futures rose 0.2 percent, while FTSE futures rose 0.1 percent.

MSCI’s broadest index of Asia-Pacific stocks outside Japan gained 0.9%, while Chinese blue chips gained 0.3%. Japan’s Nikkei confirmed 1.6 percent, led by a rebound in downturned bank stocks.

Equities rose in Australia and benchmark futures in Japan and Hong Kong rose. Australian and New Zealand government bond yields rose following the action in the Treasury market on Tuesday.

Shares in US lenders rallied as fears of a global banking crisis subsided, driving Wall Street’s major stock indices higher ahead of the Federal Reserve’s long-awaited interest rate decision.

The Dow Jones Industrial Average rose 316 points, or 0.98 percent, to 32,560.60. The S&P 500 rose 1.3 percent to 4,002.87, while the tech-rich Nasdaq Composite rose 1.58 percent to 11,860.11.

Extreme volatility in short-dated government bonds dragged on for nine consecutive days, with traders betting on another 25 basis point rate hike. The policy-sensitive yield on two-year treasury bills rose by no less than 21 basis points to 4.18 percent.

Across the Atlantic, the FTSE 100 index closed 1.79% higher at 7,536.22, its best performance in more than four months. The exporter-heavy index received a one-week pound boost alongside a rally in bank stocks that rose 3.34 percent in the FTSE 350.