Bank guidance gets thumbs up as more firms predict rate hikes

NEARLY 40 per cent of firms expect an interest rate hike in the next year, and the Bank of England’s forward guidance policy has helped to lift confidence in the economic recovery, according to Markit.

A survey from the data firm shows that 39 per cent of firms expect a rate hike in the next 12 months, and 82 per cent say that the Bank will start to tighten in the next two years.

Just over half of firms say that they are more confident because of the Bank’s forward guidance policy, which promised to keep interest rates at their current low at least until unemployment falls to seven per cent. The poll shows the policy has made 57 per cent of businesses slightly or much more confident.

“Given the impact of interest rates on the housing market, the positive effect of forward guidance is most noticeable in the construction industry, though this is also the only sector where the policy is prompting companies to hike their prices, said chief economist Chris Williamson.