Markets bet on February interest rate hike as UK economy surges above pre-pandemic levels

Markets raised their bets on a Bank of England rate hike next month after data showed stronger-than-expected growth in November.

The economy recovered to pre-pandemic size for the first time after rising 0.9pc, much faster than the 0.4pc expected by economists, leaving output 0.7pc above its February 2020 level.

Growth was led by a 1.4% jump in retail as shoppers brought forward their Christmas shopping amid concerns about shortages and strong Black Friday sales.

Output rose across all sectors, with services rising 0.7% overall, while production rose 1% and construction 3.5% in a dry and mild climate, according to the Office for National Statistics.

Unless GDP falls more than 0.2% in December or there is a data revision, November’s jump means the UK economy will “meet or surpass its pre-coronavirus level. “during the fourth quarter as a whole, the ONS said.

Chancellor Rishi Sunak said the recovery was “a testament to the courage and determination of the British people”.

Markets are now pricing in a nearly 90% chance that the Monetary Policy Committee will raise the Bank Rate from 0.25% to 0.5% at its next meeting in February.