The Bank of England will make a further 50 basis point increase in borrowing costs next month, but then slow to a more regular 25 basis point hike in November before pausing, a survey forecasts. from Reuters.
Earlier this month, the Bank of England, the first of its major peers to begin unwinding expansionary monetary policies stemming from COVID-19, raised interest rates by 50 basis points (bps)—the biggest hike in 27 years. — in its bid to contain inflation, which is likely to hit double digits.
More than half of the economists polled by Reuters between August 9 and 12 – 30 of 51 – said the Bank of England will raise the interest rate to 2.25% on September 15, adding 50 basis points. The other 21 suggested a more moderate hike of 25 basis points to 2.00%.
The forecast for a sharp rise comes despite official data showing the economy contracted 0.1% last quarter, as well as the central bank saying the country is likely to enter a recession later this year. and will not come out of it until early 2024.
“With growth slowing, it’s tempting to assume the Bank of England will be thinking about hitting the brakes, and might even cut rates over the next year. But, at least for now, the UK’s woes are supply-driven.” and inflation: allowing inflation to rise further risks making the situation worse,” said HSBC’s Elizabeth Martins.
A large majority of those surveyed said the Bank will reduce the rate of hike in November to 25 basis points. For the December meeting, 18 economists said the central bank will add another 25 basis points, while 25 said it will pause.
The median forecast suggests that borrowing costs will end the year at 2.50%, where they will remain until a cut in 2024.
This is expected despite the threat of a recession, as the median forecast for one within a year stands at 60% and within two years at 75%.
However, the median quarterly forecast reflects only very weak or no growth, as economists have chosen different timeframes for when it might occur.