According to a Reuters poll, the Bank of England will tighten its monetary policy further and hike interest rates at the upcoming meeting on February 3. Red-hot inflation and the milder economic impact of the Omicron variant were cited as reasons for the expected hike.
Key findings
Inflation will peak next quarter before starting to decline in the third quarter and won't reach the BoE's 2% target until the second quarter of next year, adding pressure on the central bank to act.
Median inflation forecasts for this quarter and next jumped to 5.2% and 5.5% from 4.7% and 4.6% in the previous poll released in December.
Almost 65% of respondents expected a 25-basis-point rate increase, while the proportion expecting a rise to 0.50% by the end of March was more than 75%.
Median forecasts showed the BoE hiking its main interest rate by another 25 basis points in the third quarter – a quarter earlier than predicted last month. The BoE will then wait until early next year before raising it again, to 1.00%, also earlier than previously expected.
Economic growth was expected to have slowed to 0.6% this quarter after expanding by 1.0% at the end of 2021. It will then grow 0.9% next quarter before slowing to 0.7% and 0.6% in the following two quarters.
GDP growth for 2022 was pegged at 4.5%, the median of 66 economists showed, and in 2023 it was put at 2.2%. That follows an expected 7.0% expansion last year.
