BoE hints at 'earlier' rate hikes as MPC adopts more hawkish stance

Japanese Yen Currency Forecast

The Monetary Policy Committee (MPC), which voted unanimously to maintain rates in the February meeting, said an interest rate rise would be needed "somewhat earlier" in order to return inflation to its 2% target.

And, because of the UK's mediocre productivity record, the predicted rise in average earnings is, in the MPC's opinion, likely to feed into higher inflation.

"We expect the MPC to lift interest rates from 0.50% to 0.75% in May, followed by a further increase to 1.0% in November". It would also echo a global trend toward tighter monetary conditions after years of cheap cash that has spooked investors this week, particularly on Wall Street. The Dow Jones fell by over 4% for the second time this week as the hawkish Bank of England reignited concerns about higher interest rates globally.

The Organisation for Economic Cooperation and Development, the West's leading economic think tank, said the UK's economy would grow by 1.6 per cent - up from the 1.2 per cent it predicted just a few months previously.

BOE Governor Mark Carney has said that wage growth is finally picking up and that the focus of the BoE is shifting back to tackling above-target inflation.

That means that forecasts are liable to change in light of what Carney has called the "twists and turns" of the Brexit process. That's more than double the gap for the first quarter of 2019, even though what happens further in the future normally involves a broader range of uncertainty.




In recent weeks, the minority Conservative government has become increasingly split over how to handle Brexit. Meanwhile, the views of the opposition Labour Party are also unclear. The disruption will be even bigger if May's government fails to secure a transition agreement with other European Union countries by the end of March - a year before Britain is scheduled to leave the bloc. That would give firms and households time to adjust to a new relationship with the EU — Brussels has said any transition period should finish by the end of 2020.

The BoE raised borrowing costs for the first time in more than a decade in November, reversing a cut made in 2016 after the Brexit vote shock and taking them back to 0.50 percent. Swap rates, which mortgage lenders use to price their fixed-rate home loans, have already been rising with, for example, the two-year rate more than doubling during the last 18 months.

In November, the bank alerted the markets to expect two increases over the next three years.

Ian Kernohan, economist at Royal London Asset Management, said: "The latest inflation report significantly raises the risk of a rate hike in May".

This scenario, however, will leave inflation above 2% in three years, which can be judged to increase interest rates with more than the expectations of investors. Annual salary growth is expected to reach 3% at the end of 2018, in line with previous projections.

The Pound Sterling to Australian Dollar exchange rate is up 0.2% today as markets continue to favour GBP following yesterday's "Super Thursday" announcements from the United Kingdom central bank.

Related news:

Hot News

isis-killer-beheading-video-story-top British IS killers should spend life in prison, says victim's mother
Feb 10, 2018 - 02:00
He took the name Hamza and it is believed he went to Syria in 2012, leaving behind four children born to two different women. The Americans confirmed their identities using fingerprints and other biometric measurements.

isis-killer-beheading-video-story-top Bush on immigrants: 'We ought to say thank you and welcome them'
Feb 09, 2018 - 02:05
Bush spoke on Thursday at a summit in Abu Dhabi put on by the Milken Institute, an economic think tank based in California. Bush acknowledged the US immigration system is "broken" and explained that he "tried [to fix it], but unsuccessfully".

isis-killer-beheading-video-story-top England unveil fresh World Cup kits
Feb 09, 2018 - 02:04
Africa Twitter in particular just couldn't get enough of how absolutely stunning and adorable the kits look. We are also introduced to the athlete journey pieces which we'll likely see our players wear off the pitch.

isis-killer-beheading-video-story-top Salma Hayek 'Felt Ashamed' For Delaying Her Weinstein Story
Feb 09, 2018 - 02:04
Salma Hayek and Oprah speak onstage during " Oprah's Super Soul Conversations " at The Apollo Theater on February 7, 2018 in NY . I went, 'Yes, no, yes, no, yes, no. "He told me, 'I'm going to kill you'". "I thought of the shame (sic)".

isis-killer-beheading-video-story-top FBI Says There Is No Evidence Border Patrol Agent Murdered
Feb 09, 2018 - 02:02
A spokesman for the National Border Patrol Council, the union that represented the officers, said it was an "ambush". Martinez would die hours later from head injuries, according to preliminary information from the medical examiner.

isis-killer-beheading-video-story-top Former Les Mis star SuRie to sing for United Kingdom at Eurovision
Feb 09, 2018 - 02:02
The former backing singer for Chris Martin and Will Young has also starred in Les Miserables. She describes the song as "a smash" and says it is an 'anthemic, soulful pop party'.

isis-killer-beheading-video-story-top Kylie Jenner Reveals the Name of Her Newborn Baby Girl
Feb 09, 2018 - 01:59
I knew for myself I needed to prepare for this role of a lifetime in the most positive, stress free and healthy way I knew how. It's not the most reliable statement in the world, but then there's the issue of Kylie's current relationship with the rapper.

isis-killer-beheading-video-story-top Meet the Oregon State recruits who signed in December
Feb 08, 2018 - 07:23
This marks the start of a period where another batch of athletes can make their college choices official. This year was no different, as local athletes signed their letters of intent to play at the next level.

isis-killer-beheading-video-story-top Apple battery health fix - What it looks like
Feb 08, 2018 - 07:20
If everything is functioning well, you should see a message that reads: "Your battery is now supporting normal peak performance". Apple has confirmed that the iPhone X, iPhone 8, and 8 Plus do not have the performance management system used in older iPhones.

isis-killer-beheading-video-story-top Smart TVs become new path for hackers to attack
Feb 08, 2018 - 07:20
However, the process by which people agree is often murky, Consumer Reports says, and it often leads to less functionality. Last February, Vizio was fined for collecting and selling data of this sort without the permission of its users.

isis-killer-beheading-video-story-top BC premier says he won't escalate trade dispute with Alberta over pipeline
Feb 08, 2018 - 07:12
While Horgan spoke to reporters in Victoria, Notley tweeted messages of support that she said she has received from British Columbia.

isis-killer-beheading-video-story-top Hong Kong democracy protesters freed
Feb 08, 2018 - 07:12
The Court of Final Appeal's ruling was an unexpected victory for the city's youthful opposition movement after recent setbacks. In 2016, Wong, Law and Chow were sentenced to non-jail terms, including community service for "unlawful assembly".

isis-killer-beheading-video-story-top Carter Page Who Once Bragged About Advising Kremlin Backtracks
Feb 07, 2018 - 00:57
Page, however, insisted that it was a completely innocent transaction. Of course, that wasn't Page's only connection to Russian Federation .

isis-killer-beheading-video-story-top Kenyan opposition figure charged with treason over Odinga's 'swearing in'
Feb 07, 2018 - 00:57
His supporters in the opposition stronghold of Kisumu city in western Kenya clashed with police, who fired tear gas at them. Separately, a court ordered police to halt attempts to arrest at least three Nation Media Group journalists.

isis-killer-beheading-video-story-top E-cigarettes should be on sale in hospital shops, health body says
Feb 07, 2018 - 00:56
Mr Dockrell said there was no reason why "a hospital shouldn't designate some indoor areas where patients and visitors can vape ". PHE has published a review of the evidence, which states e-cigarettes are helping tens of thousands of smokers quit.