Bank of England set to Elevate Rates again as Inflation Leads for 10%

Investors and most economists are predicting a quarter-point rate hike by the BoE next Thursday as the Bank of England looks set to raise interest rates next week for the fifth time since December, its steepest run of rate hikes in 25 years, and is likely to keep going in the coming months as inflation heads for double digits.

In addition, Britain is forecasted to have the weakest economy in 2023 among the world's big, rich nations. That would take Bank Rate to 1.25%, its highest level since January 2009, when Britain's economy was holed by the global financial crisis.

Investors are betting on the BoE's Monetary Policy Committee doubling Bank Rate to 2% by September and hitting 3% by March next year. Some economists are ramping up their forecasts too.

Sanjay Raja at Deutsche Bank (ETR:DBKGn) said on Friday he now expected rates to peak at 2.5%, up from a previous call of 1.75%, starting with a 0.25% increase next week.

"We don't expect a unanimous decision, however. Instead, risks are skewed to a more split MPC, with at least three members on the committee looking for a bigger 50 basis-point move," he said in a note to clients. "There's also a possibility of an even messier vote, with one or two members looking for no change to the Bank Rate."

©Photo: Financial Times