A FURTHER quarter-point rise in UK base rates next month, to 0.75%, is now forecast by nearly two-thirds of economists.
Twenty-five out of 40 economists polled by Reuters between February 7 and 11 predict the Bank of England’s Monetary Policy Committee will vote for such a rise next month. The next rates decision is due to be announced on March 17.
Meanwhile, 21 out of 41 economists forecast a further rise in benchmark UK interest rates to 1% in the second quarter.
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Financial markets are more hawkish, pricing in a cumulative 0.75 percentage point rise in base rates between the MPC’s March and May meetings.
Expectations of early rises in UK interest rates have grown significantly in the last month, as inflationary pressures have continued to build.
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The Bank of England now forecasts annual UK consumer prices index inflation, which rose from 5.1 per cent in November to 5.4% in December, will peak at around 7.25% in April.
The Old Lady of Threadneedle Street’s target for annual CPI inflation is 2%. Annual inflation in December on the old all-items retail prices index (RPI) measure was 7.5%.
The MPC raised UK base rates from 0.1% to 0.25% in December.
It then implemented a quarter-point rise to 0.5% on February 3 in a five- to-four vote. The four dissenting members of the committee voted unsuccessfully for a half-point rise at the February meeting.
Setting out the view of Jonathan Haskel, Catherine L Mann, Dave Ramsden and Michael Saunders, in their vote for a half-point rise in base rates earlier this month, the minutes of the MPC meeting state: “Four members judged that a 0.5 percentage point increase in Bank Rate was warranted at this meeting.
“Monetary policy had been very accommodative, and capacity pressures were now widespread, especially in the labour market.”