The Bank of England (BoE) is expected to raise interest rates faster than previously anticipated by the market in an attempt to tame inflation, according to Reuters poll who has significantly upgraded their inflation outlook.
UK’s consumer price index (CPI) has reached 30 years high in December at 5.4% on an annual count which prompted UK’s central bank to raise rates for the second time in a row earlier this month to 0.50%. Inflation has overshoot BoE’s target of 2.00%.
The expectation of rates hike is validated further as nearly half of Monetary Policy Committee (MPC) members earlier voted for a hike to 0.75%.
Two-thirds of respondents in the poll or 25 of 40 expects a 25 basis points increase in rates to 0.75% during the end of the next MPC meeting on March 17.
“A combination of higher inflation, a resilient labor market, and better-than-expected Omicron data warrants a continuation of the hiking cycle that began in December,” said Michal Stelmach, senior economist at KPMG.
“We expect the MPC to follow through with rate hikes in March and May, with a potential pause afterwards to allow the new policy direction to get embedded”.
