The MPC started hiking its base rate in December in order to tame inflation, which is soaring due to high energy prices, geopolitical tensions and ongoing supply chain problems
Interest rates are set to hit their highest level since January 2009, with the Bank of England expected to hike its base rate to at least 1.5 percent on Thursday.
The Bank’s Monetary Policy Committee (MPC) is expected to vote unanimously for a rate rise, which will be the sixth in a row.
The MPC started hiking its base rate in December in order to tame inflation, which is soaring due to high energy prices, geopolitical tensions and ongoing supply chain problems.
The base rate is currently 1.25 percent and many economists believe that the MPC will go further than the City expects.
Instead of raising the base rate by a quarter point, they believe the MPC will want to act ‘forcefully’ and hike it by 0.5 points to 1.75 percent.
Inflation, as measured by the consumer prices index, is currently 9.4 percent and is expected to peak at over 11 percent, driven higher by rising energy prices.
We expect a 50-basis point rate hike from the Bank next week, its first such move this cycle, ING developed market economist James Smith said.
Policymakers hinted back in June that they could act forcefully to get inflation lower, he said.
And with a 50bp move more or-less priced in, that’s what we expect them to do, he said.
Paul Dales, chief UK economist at Capital Economics, said that since June, ‘various MPC members have talked tough on inflation’. As a result, he said 0.5 percent hikes could become the norm as the MPC raises its base rate up to 3 percent.
We expect the MPC to step up its fight against high inflation at its meeting on Thursday by raising interest rates by 50 points from 1.25 percent to 1.75 per cent, rather than repeating the recent 25-point hikes, he said.
He said: What’s more, the MPC may imply that it is willing to raise rates by 50 points at future meetings if there are no signs that domestic price pressures are easing.