Reported by The Guardian
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Predicting a central bank’s actions can be risky, but there will certainly be surprise in the City of London today if the Bank of England doesn’t raise interest rates at midday.
The BoE is widely expected to announce its first increase in UK interest rate in more than three years, at noon today. A quarter-point rise would take Bank Rate up to 4% from 3.75%.
More from the original report
With inflation rising faster than the Bank’s target, most of its policymakers are expected to decide now is the moment to tighten monetary policy. This, they might hope, would dampen the risk that high energy costs spill over and push up the cost of other goods and services.
The Bank hasn’t hiked borrowing costs since August 2023, when bank rate hit 5.25%.
It will also be playing ‘catch-up’ with other central banks – rates have already risen in the US, Japan, the eurozone, Australia and Canada this year.
Peder Beck-Friis, economist at bond trader PIMCO, says a hike to 4% is “fully priced by markets,” explaining:
double quotation mark The BoE is primarily responding to higher energy prices, but macro data have also turned more hawkish.
Growth has been resilient, the labour market has stabilized, and core inflation has edged higher. However, the economy does not look overheated, and pass-through from higher energy prices into core inflation has been modest overall.
Andrew Wishard , senior UK economist at Berenberg, predicts the decision will be almost unanimous:
double quotation mark We expect an 8-1 vote in favour of the move, with only Alan Taylor dissenting. Although several rate setters will vote for the hike reluctantly, developments in the real economy justify it. Strong economic growth and a tentative stabilisation of the labour market suggest that an interest rate hike will restrain economic activity only modestly.