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BOE Expected to Go Faster and Further on Rates, Poll Finds

Andrew Atkinson and Harumi Ichikura
·1 min read

(Bloomberg) -- The Bank of England is expected to raise interest rates faster and further than anticipated a month ago as it battles the fastest inflation in decades.

Most Read from Bloomberg

The central bank, which had been expected to pause after hiking to 1.5%, is now predicted to lift the benchmark cost of borrowing to 2% by this time next year, according to economists surveyed by Bloomberg last week.

The poll published Tuesday shows the BOE delivering an unprecedented fifth consecutive hike from 1% to 1.25% on Thursday, followed by increases in August and November -- and then again in May 2023.

At Thursday’s meeting economists expect three of the BOE’s nine officials to vote for a 50 basis point hike, with the majority backing a 25 basis point move.

The shift follows a drip-drip of news that has underscored the scale of the task facing policy makers in reining in inflation. The labor market remains tight, fuel prices are at all-time highs, energy bills are set to jump another 40% in October, and a £15 billion cost of living package announced by the government last month risks adding to inflation next year.

Economists now think inflation will average 8.9% in the second quarter and remain higher than previously forecast through the end of next year, according to the survey.

They are still less hawkish that financial markets, where rates above 3% by next year are now being priced in. A red-hot US inflation reading last week has rekindled speculation that central banks around the world are behind the curve on tightening policy.

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©2022 Bloomberg L.P.

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