LONDON—The dollar strengthened on Thursday, after the Federal Reserve signalled U.S. interest rates will likely peak at a higher rate than markets had expected, while the pound fell after the Bank of England raised rates but warned of a “very challenging outlook.”
The BoE lifted UK interest rates to 3 percent from 2.25 percent in its largest single increase since 1989 as it battles the twin forces of a slowing economy and red-hot inflation.
The central bank forecasts inflation will hit a 40-year high of around 11 percent during the current quarter, but it pushed back against expectations for further steep rate hikes, saying Britain has already entered a recession that could potentially last two years—longer than during the 2008–09 financial crisis….