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Economists Expect a U.K. Interest Rate Hike in May
Photographer: Chris J. Ratcliffe/Bloomberg
February 14th, 2018 | 10:10 AM | 721 views
Economists who were slow to predict the first Bank of England interest-rate hike in a decade last year now expect the next one to come in May, but the decision is seen as being on a knife-edge.
In Bloomberg’s monthly survey, 21 of the 41 economists predict a move to 0.75 percent that month, far earlier than the previous prediction in January. Last year a majority of economists didn’t foresee the November rate increase until a month before the decision, well after markets had priced it in.
In the latest survey, a further eight economists see a hike in August, with the accelerated outlook reflecting a shift in market pricing since the start of 2018.
That move gathered pace after BOE Governor Mark Carney said last week that rates may need to rise at a steeper pace than previously thought to prevent the economy from overheating. While Brexit remains a threat to the outlook, the bank is concerned that the economy can’t grow as fast as in the past without generating inflation pressures.
BOE official Gertjan Vlieghe hammered home that message on Monday, saying that more than three increases will be needed across the institution’s three-year horizon.
The median estimate among analysts is for a further tightening in February next year, making them more bullish than markets. Investors see about a 75 percent chance of a hike in three months, from around 40 percent at the start of the year, with a second move fully priced in for May 2019.
courtesy of BLOOMBERG
by David Goodman and Harumi Ichikura
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