Bank expects double interest rate hike by 2019

Bank expects double interest rate hike by 2019

The Bank of England signalled it intends to raise interest rates twice in 2019, and said it expects the economy to be boosted by the recent progress made in the Brexit talks.

The Monetary Policy Committee decided to keep rates at 0.5 per cent at its December meeting, but suggested a timescale for future rises.

Data released this week revealed inflation hit a six year high of 3.1 per cent. Some had expected a rate increase to curb this.

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But members of the nine-person MPC committee said they expect the current high rate of UK inflation to be around the peak level, and said it is caused by the decline in the value of sterling, the effect of which is temporary.

The central bank said the recent deal agreed by Theresa May to move the negotiations around Britain leaving the European Union onto the second phase, have reduced the chances of no deal being agreed.

The bank believes this will provide more certainty for consumers and businesses, boosting the economy.

The Bank of England also believes that Philip Hammonds Budget of 22 November could boost GDP by 0.3 per cent between now and 2020, and the plans contained slightly more government spending than had previously been planned for as the chancellor eased the pace of some previously announced spending cuts.  

Nancy Curtin, chief investment officer at Close Brothers Asset Management, said: “Inflation may have hit a near six-year high, it’s clear that now is not the time for a further rate rise.

"Even last month’s decision may have been too hasty given the strain the economy is under, and we certainly don’t expect further moves in the short-term.

"Employment may still be near a record high, but wage growth continues to lag inflation, which will limit consumer spending.”