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Bank of England is expected to hike interest rates to 4% next Thursday after energy prices pushed inflation to 3.5%

Andrew Bailey, with markets pricing in around 100 basis points of tightening over the coming year — a pace analysts at Bank of America and Danske Bank consider excessive.
Andrew Bailey, with markets pricing in around 100 basis points of tightening over the coming year — a pace analysts at Bank of America and Danske Bank consider excessive.

City analysts have reached near-unanimous consensus that the Monetary Policy Committee will vote 7-2 to lift Bank Rate to 4% on Thursday, with governor Andrew Bailey expected to support the increase as rising energy prices stemming from the Middle East conflict keep inflation stubbornly above the 2% target. The autumn Budget was judged broadly market-neutral, leaving the MPC with a clear path to act. Rabobank and Bank of America both forecast a further 25bp increase to 4.25% in February 2027.

Inflation hit 3.5% in the year to September, pushed above target primarily by higher oil and gas prices feeding through to household energy bills.

Swati Dhingra and Alan Taylor are expected to dissent in favour of holding rates, while the other seven MPC members are set to back the pre-emptive rise.

Markets have pencilled in around 100 basis points of tightening over the next year — a trajectory that analysts at Bank of America and Danske Bank both consider excessive.

MoreThe TimesThe Bank got its budget wish, now it’s decision time on interest ratesCity A.M.‘Nailed on’: Bank of England expected to hike interest ratesFXStreetBank of England: Gradual hiking path – RabobankFXStreetBank of England – A hike to contain inflation risks - FXStreetInvesting.comBank of America expects Bank of England rate hike on Thursday - Investing.com
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