Economists polled by Reuters expect the Bank of England to wait until early next year, probably February, before raising rates again. Interest rate futures, however, almost completely price in a December rise. Upcoming data and energy prices may decide which view proves right.
The Bank of England will wait until early next year before raising interest rates again, probably February, according to economists polled by Reuters. They said upcoming data may persuade the bank to build on last week's increase sooner.
Economists and futures disagree on December
All but one of the 65 economists surveyed November 11-13 said the BoE would leave the Bank Rate at 4.00% after its Monetary Policy Committee meets in the week before Christmas. The other expected a rise.
Interest rate futures almost completely price in a December rate rise, in contrast to the economists' view. The outcome will depend largely on how energy prices trade in coming weeks.
Some respondents said they would wait for the October inflation data, due on November 18, before changing their view. Ellie Henderson at Investec, who expects a February move, said a December hike is certainly on the table.
Last week's vote and the rate outlook
Last week the Monetary Policy Committee voted 8-1 for a 25 basis point hike. Catherine Mann wanted a 50 bp increase.
The vast majority of economists saw the Bank Rate peaking at 4.25%. Only a handful saw another 25 basis point hike next year to 4.50%, and seven saw no rise from 4.00%.
Energy costs push inflation higher
Inflation rose to 3.5% in September from 3.1% in August, official data showed, well above the central bank's 2.0% target. Global energy costs have soared, in large part due to war in the Middle East.
According to the median response in the poll, inflation will peak at 4.3% early next year. The BoE's own forecasts saw it topping out around 5% in the second quarter.
Britain's GDP accelerated to 0.7% last quarter, its fastest pace in 2-1/2 years. Economists raised their growth forecast for this year to 1.5% from 1.3%.
Deputy Governor Clare Lombardelli said on Tuesday, according to Reuters: "I wouldn’t rule December in or out, February in or out".
Source: Reuters via Investing.com
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