With global interest rates rising higher and faster than expected, a reverse to rate cuts is unlikely in 2023, says Fitch Ratings.

In a new report, the rating agency said interest rates in the U.S. and Europe are now expected to peak at a higher level, and at a later date, than predicted in its latest forecasts.

Fitch said it now expects the U.S. Federal Reserve to hike rates by another 50 basis points to 4.5% at its December meeting, followed by increases of 25 basis points at each of its meetings in February and March 2023, with rates expected to remain at 5.0% throughout the rest of 2023.

Similarly, it sees the European Central Bank hiking rates by 50 basis points in December, and again by 25 basis points in February and March. After that, rates are expected to stay at 3% for the year.

“Stubbornly high inflation outturns and a hardening of central bank resolve to bring inflation down make a pivot back towards rate cuts in 2023 unlikely,” the report said.

For the U.K., Fitch forecasted the Bank of England to take rates to 4.75% by the second quarter of 2023, which “is much higher than the 3% peak” it previously forecast.

“Inflation is proving stubbornly high, despite global energy and food prices softening in recent months and a sharp easing in supply-chain pressures in global consumer goods markets,” Fitch said. “Rising services inflation is a major concern as it signals inflationary pressures are becoming more embedded and self-reinforcing.”

Additionally, wage growth is elevated amid tight labour markets, it said.

“Monetary tightening has made little progress so far in easing supply-demand imbalances in the labour market,” Fitch said.

“Against this backdrop, we think central banks are becoming more determined to take interest rates further into ‘restrictive’ levels in the coming months and are likely to be nervous about a premature pivot to interest rate cuts in the latter part of 2023,” it said.

“Indeed, recent central bank commentary has emphasized that risks of ‘over-tightening’ monetary policy in the near term are outweighed by the risks of not tightening enough and allowing inflation to become more entrenched.”