This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/2023/apr/20/bank-of-england-predicted-to-raise-interests-rates-one-more-time-in-may
The article has changed 5 times. There is an RSS feed of changes available.
| Version 3 | Version 4 |
|---|---|
| Bank of England predicted to raise interest rates one more time in May | Bank of England predicted to raise interest rates one more time in May |
| (7 days later) | |
| Increase to 4.5% will be last rise in current cycle, former rate-setter Michael Saunders predicts | Increase to 4.5% will be last rise in current cycle, former rate-setter Michael Saunders predicts |
| The Bank of England is likely to increase interest rates one more time in May, to 4.5%, before inflation falls “sharply” over the rest of the year, a former rate-setter has predicted. | The Bank of England is likely to increase interest rates one more time in May, to 4.5%, before inflation falls “sharply” over the rest of the year, a former rate-setter has predicted. |
| Michael Saunders, who was a member of the monetary policy committee until August, said the UK was nearly at a “turning point” for interest rates, which have risen sharply over the past year as policymakers tried to curb a surge in prices caused by an increase in energy costs. | Michael Saunders, who was a member of the monetary policy committee until August, said the UK was nearly at a “turning point” for interest rates, which have risen sharply over the past year as policymakers tried to curb a surge in prices caused by an increase in energy costs. |
| He said his former colleagues at the Bank of England would most probably vote for a final increase in May – which would be the 12th in a row – before holding interest rates steady over the following months. | He said his former colleagues at the Bank of England would most probably vote for a final increase in May – which would be the 12th in a row – before holding interest rates steady over the following months. |
| “I think they’ll raise interest rates again at the May meeting another 25 basis points … That’ll take interest rates up to 4.5%,” Saunders told the BBC. | “I think they’ll raise interest rates again at the May meeting another 25 basis points … That’ll take interest rates up to 4.5%,” Saunders told the BBC. |
| “I think we get this further, probably final, hike in May, and then probably a long period in which interest rates are fairly stable. The big tightening cycle – interest rates going up meeting after meeting – I think that’s largely over and what you’ll see over the rest of this year is inflation crawling lower, interest rates stable.” | “I think we get this further, probably final, hike in May, and then probably a long period in which interest rates are fairly stable. The big tightening cycle – interest rates going up meeting after meeting – I think that’s largely over and what you’ll see over the rest of this year is inflation crawling lower, interest rates stable.” |
| Households are likely to breathe a sigh of relief if Saunders’ predictions prove correct, given most have seen bills for groceries, heating and other essential goods soar in recent months. The increases after Russia’s full-scale invasion of Ukraine have piled pressure on the poorest households in Britain, who spend a larger share of their income on essentials. | Households are likely to breathe a sigh of relief if Saunders’ predictions prove correct, given most have seen bills for groceries, heating and other essential goods soar in recent months. The increases after Russia’s full-scale invasion of Ukraine have piled pressure on the poorest households in Britain, who spend a larger share of their income on essentials. |
| Saunders said: “The overwhelming factor behind the rise in inflation has been the surge in energy prices – that’s lifted households’ gas and electricity bills, pushed up firms’ cost. So [they’ve] seen a ripple through to higher services inflation, higher goods, price inflation and it’s also contributed to the rise in food prices.” | Saunders said: “The overwhelming factor behind the rise in inflation has been the surge in energy prices – that’s lifted households’ gas and electricity bills, pushed up firms’ cost. So [they’ve] seen a ripple through to higher services inflation, higher goods, price inflation and it’s also contributed to the rise in food prices.” |
| That, for example, has then resulted in higher prices in stores and restaurant menus, as businesses try to recoup their surging costs. “Those indirect, second-round effects of higher energy costs take a while to come through. They’re not yet finished, but we are probably now past the peak,” he said. | That, for example, has then resulted in higher prices in stores and restaurant menus, as businesses try to recoup their surging costs. “Those indirect, second-round effects of higher energy costs take a while to come through. They’re not yet finished, but we are probably now past the peak,” he said. |
| “We are now just about finally at the turning point. With interest rates having gone up pretty sharply … and agricultural commodities coming lower, wholesale energy prices coming off, we’re now likely to see inflation fall pretty sharply over the rest of this year.” | “We are now just about finally at the turning point. With interest rates having gone up pretty sharply … and agricultural commodities coming lower, wholesale energy prices coming off, we’re now likely to see inflation fall pretty sharply over the rest of this year.” |
| His comments on Radio 4’s Today Programme come days after the Office for National Statistics figures showed inflation fell by less than expected, to 10.1% last month. Economists had forecast a decline to 9.8%. | His comments on Radio 4’s Today Programme come days after the Office for National Statistics figures showed inflation fell by less than expected, to 10.1% last month. Economists had forecast a decline to 9.8%. |
| Sign up to Business Today | Sign up to Business Today |
| Get set for the working day – we'll point you to all the business news and analysis you need every morning | |
| after newsletter promotion | after newsletter promotion |
| The likelihood of the Bank of England raising interest rates next month increased after the news about inflation, with markets subsequently pricing in a 97% chance of a rise to 4.5% on 11 May, matching Saunders’ predictions. | The likelihood of the Bank of England raising interest rates next month increased after the news about inflation, with markets subsequently pricing in a 97% chance of a rise to 4.5% on 11 May, matching Saunders’ predictions. |
| Economists at UBS are also predicting a further interest rate rise in May, and are expecting inflation to average 6.5% in 2023 and 2.3% in 2024, before dropping to the Bank of England’s 2% target by the end of 2025. | Economists at UBS are also predicting a further interest rate rise in May, and are expecting inflation to average 6.5% in 2023 and 2.3% in 2024, before dropping to the Bank of England’s 2% target by the end of 2025. |