...By Henry George for TDPel Media.
The Bank of England is expected to raise its interest rates by a quarter of a percentage point, taking the UK’s base rate to 4.5%, its highest since 2008.
This will be the twelfth consecutive meeting where the Monetary Policy Committee (MPC) has voted for a hike as it continues to fight inflation.
It is widely believed that this will be the last hike before the bank takes a pause in the fight against inflation.
There is a lot of speculation that the May vote will mark the end of the consecutive rate rises at twelve in a row.
Before March, economists believed that this month would be a pause, but inflation data failed to drop under 10%. The HSBC economists predict a rise of a quarter of a percentage point, as do most other forecasters.
If inflation falls back toward the Bank of England’s official 2% target at a faster pace, rates could reach their peak with Thursday’s announcement at noon after the MPC meeting chaired by the Bank of England’s governor, Andrew Bailey.
Paul Dales, chief UK economist at Capital Economics, warns that “if the economy and domestic inflation prove more resilient than we expect rates may peak at 4.75% or 5%”. Last month, the nine-member MPC voted by seven-to-two for another quarter-point increase.
The drop in oil and gas prices should now be feeding through to lower prices across the high street, giving the Bank of England room for a pause this month.
The decision is due at noon on Thursday and will be closely watched by City experts, mortgage holders, and homebuyers across London and the UK.
The HSBC added that it expected the MPC vote to be a “7-to-2 vote for a [quarter of a percentage point] hike to 4.50% with the two dissenters being Silvana Tenreyro and Swati Dhingra, who we expect to vote for no change as they have been doing in recent meetings.”
Analysis and Commentary:
The Bank of England’s decision to raise interest rates by a quarter of a percentage point is an attempt to curb inflation, which has been stuck stubbornly in double digits.
While the Bank has been fighting this inflation for twelve consecutive meetings, many believe that this will be the last hike before taking a pause.
Experts and analysts have speculated that the May vote may mark the end of consecutive rate rises.
However, if inflation falls back towards the Bank’s 2% target, rates could reach their peak.
Despite this, economists warn that if the economy and domestic inflation prove more resilient than expected, rates could peak at 4.75% or 5%.
The drop in oil and gas prices should feed through to lower prices across the high street, giving the Bank of England room for a pause this month.
The decision will be closely watched by City experts, mortgage holders, and homebuyers across London and the UK.