The Bank of England is likely to follow suit if the Federal Reserve raises interest rates in the United States, threatening to pile more pain on homeowners. A decision by the Federal Reserve on another possible interest rate hike is expected on Wednesday with forecasters anticipating Tuesday’s US inflation update to show consumer prices down to 4.1 percent from April’s 4.9 percent.

Some hope the Fed will skip another rate hike when its monthly board meeting ends on Wednesday, but this might be trickier if inflation comes in higher than expected.

Two Fed board members have said the US central bank should hold off on a rate increase while it gathers data on the impact of previous hikes.

In any event, Britain’s central bank will be watching closely to see which way the Fed moves.

Peter Smith, Professor of Economics and Finance at the University of York, told Express.co.uk an increase in the US means the Bank of England’s rate-setting Monetary Policy Committee will be more likely to increase rates on this side of the pond as well.

Professor Smith added: “If the Fed does not raise rates it takes pressure off the Monetary Policy Committee to raise rates next time around.”

But he warned with a “robust” real economy in the United States, there is a slightly increased chance of a rate hike there as the Fed acts to pull inflation back to its 2 percent target.

The expert said: “A US rate rise is most likely. Doing nothing is the next most likely. I think markets have priced in a 0.5 percentage point rise.”

Dr Muhammad Ali Nasir, Associate Professor in Economics at Leeds University Business School, told Express.co.uk much depends on the US inflation figures.

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He said: “There is an expectation the US may pause the increase in the interest rates now, but it very much depends on the inflation figures.

“Inflation in the US has already come down very sharply and if today’s figures show a further big fall, then obviously there will be more support for the idea of pausing any further increase as deflation or undershooting the target of 2 percent is not desirable either.”

He added a pause would be good news for the global economy, but a pause or even a decrease in US interest rates in the event of a fall in US inflation would be even better.

Dr Nasir explained: “Whenever the US increases the rates, it can have implications for the rest of the world and other central banks have to increase the rates which hurts the real economy – firms, households – as the cost of borrowing goes up.”

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He said a US rate hike and “hawkish” stance on inflation would beg the question why the Bank of England is not acting more aggressively with inflation much higher in the UK than in the US.

Meanwhile, UK wages have surged at their fastest rate on record outside of the pandemic, further reinforcing expectations interest rates will have to rise as policymakers look to curb inflation.

Official figures showed average regular wages, not including bonuses, jumped 7.2 percent higher in the three months to April, up from 6.8 percent in the three months to March and higher than expected.

April’s 9.7 percent rise in the UK National Living Wage helped push up salaries to the highest level since records began in 2001, excluding the skewed pandemic years.

Despite the record surge, the Office for National Statistics (ONS) revealed pay continues to be outstripped by rising prices, with regular wages down 2.3 percent with Consumer Prices Index inflation (CPI) taken into account.

Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown said: “The latest labour market trends risk adding fuel to inflationary fires and are set to make the Bank of England more determined to raise interest rates to put out the flames.”

She added: “The increases to minimum wage levels, up almost 10 percent partly account for the rise and while hugely welcome for those on low incomes it comes at a hugely tricky time when policymakers want to see spending power reduced, not bolstered, to help bring down the rate of price increases.”

Samuel Tombs at Pantheon Macroeconomics said: “The renewed pick-up in wage growth in April will add fuel to the recent rise in gilt yields and expectations for the future path of Bank Rate, by fanning the impression the UK has a unique problem with ingrained high inflation.”

He added: “Wage growth has far too much momentum for the Monetary Policy Committee to stop hiking Bank Rate yet.”

Despite the gloomy outlook for some households, global stock markets and Wall Street futures rose on Tuesday ahead of the US inflation update and Fed’s interest rate decision.

London and Paris opened higher while Shanghai, Tokyo and Hong Kong advanced. Oil prices also bounced back from a plunge on Monday.

On Tuesday, the S&P 500 future was up 0.3 percent with the Dow Jones Industrial Average gaining less than 0.1 percent.

In early trading, the FTSE 100 rose 0.1 percent to 7,580.12 and the CAC 40 in Paris advanced 0.6 percent to 7,290.47. The DAX in Frankfurt gained 0.4 percent to 16,155.17.

The Nikkei 225 in Tokyo surged 1.8 percent to 33,018.65 and the Hang Seng in Hong Kong advanced 0.6 percent to 19,521.42.

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