The Bank of England is set to hold interest rates at 0.5 per cent on Thursday, but rate rises are forecast for later in the year.
The bank’s Monetary Policy Committee (MPC) will vote on the rate on so-called Super Thursday, when the bank will also release its quarterly inflation report and release the minutes from the MPC’s last meeting.
“With the pound at its highest levels since the Brexit vote against the US dollar MPC officials will be hoping that the 18 per cent gain from a year ago will start to have a downward effect on the headline inflation rate,” said Michael Hewson, chief market analyst at CMC Markets UK.
Tomorrow, markets will have an indication of how the economy fared in January with the release of the latest services purchasing managers’ index.
The EY ITEM Club expects the Bank of England to raise interest rates twice this year. EY forecasts the rate to rise from 0.5 per cent to 0.75 per cent in May, and then again to one per cent in November. It has tipped the bank’s rate to hit 1.25 per cent in 2019.
But the Bank of England’s governor, Mark Carney, has said the pace of rate rises will depend on the government’s Brexit negotiations. Speaking at the World Economic Forum in Davos last month, Carney said growth will be affected by the kind of deal the UK secures with the EU.