Economists expect the Bank of England to hike interest rates consecutively for the first time since 2004 as it looks to steer the U.K. economy through persistent high inflation.
"If December's surprise rate hike decision taught us anything, it was, firstly, that the Bank – and especially Governor Andrew Bailey – is clearly worried about elevated rates of headline inflation and the risk of a virtuous wage-price cycle," James Smith, developed markets economist at ING, said.
"This would see roughly GBP 28bn of reinvestments fall out from the Bank's balance sheet next month with a further GBP 9bn dropped over the remainder of the year." What's more, Deutsche Bank expects the MPC to highlight the wide confidence bands around the inflation outlook. This would enable the Bank to stick with a message of only"modest" tightening, and Deutsche sees another 25 basis points hike in August, followed by further hikes in February 2023 and August 2023, taking the Bank Rate to 1.25%.
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