According to a Reuters poll, the Bank of England will further tighten its monetary policy and raise interest rates further at the next meeting on February 3. Red-hot inflation and the milder economic impact of the Omicron variant have been cited as reasons for the expected rate hike.
Inflation will peak next quarter before starting to decline in Q3 and won’t hit the BoE’s 2% target until Q2 next year, which will add pressure on the central bank to act.
Median inflation forecasts for this quarter and the next rose to 5.2% and 5.5% from 4.7% and 4.6% in the previous survey released in December.
Nearly 65% of respondents expect a rate hike of 25 basis points, while the proportion expecting an increase to 0.50% at the end of March was higher than 75%.
The median forecasts showed that the BoE will increase its main interest rate by another 25 basis points in the third quarter, a quarter earlier than forecast last month. The BoE will then wait until early next year before raising it again., up to 1.00%, also earlier than expected.
GDP growth for 2022 stood at 4.5%, according to the median of 66 economists, and in 2023 it stood at 2.2%. This follows an expected expansion of 7.0% last year.