The expected move will raise the Bank Rate from 3.75% to 4%, representing the first monetary tightening delivered by the central bank since August 2023. Officials aim to stop rising energy expenses from filtering into wider consumer goods and services across the economy. Financial markets have already fully priced in the adjustment following similar rate hikes across the US, the eurozone, Japan, Australia, and Canada. Berenberg economist Andrew Wishard projects an 8-1 majority vote for the increase, with Alan Taylor expected to dissent.
Key points
Policymakers are tightening credit conditions to suppress rising inflation driven by pers…: Policymakers are tightening credit conditions to suppress rising inflation driven by persistent high energy costs.
The anticipated rate hike brings domestic policy in line with central banks in the US, Ja…: The anticipated rate hike brings domestic policy in line with central banks in the US, Japan, Canada, Australia, and the eurozone.
Financial markets have fully priced in the policy adjustment due to resilient economic gr…: Financial markets have fully priced in the policy adjustment due to resilient economic growth and stabilized labor data.
Sources checked by our analysis pipeline: 1
Introduction: Bank of England sets interest rates today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Predicting a central bank’s actions can be risky, but there will certainly be surprise in the City of London today if the Bank of England doesn’t raise interest rates at midday.
The BoE is widely expected to announce its first increase in UK interest rate in more than three years, at noon today. A quarter-point rise would take Bank Rate up to 4% from 3.75%.
With inflation rising faster than the Bank’s target, most of its policymakers are expected to decide now is the moment to tighten monetary policy. This, they might hope, would dampen the risk that high energy costs spill over and push up the cost of other goods and services.
The Bank hasn’t hiked borrowing costs since August 2023, when bank rate hit 5.25%.
It will also be playing ‘catch-up’ with other central banks – rates have already risen in the US, Japan, the eurozone, Australia and Canada this year.
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