Interest rates ‘likely to rise in May’ despite Brexit
Most economists polled by Reuters still expect summer rate rise but don’t see follow up for another year
A majority of economists still expect UK interest rates to rise in May even though Brexit is making the future hard to predict.
Last month, the Bank of England’s rate-setting monetary policy committee (MPC) voted unanimously to leave rates at 0.5%, but “the tone of its discussion suggests the cost of borrowing will not remain this low for much longer”, says The Guardian.
The Bank is intent on bringing the UK’s 3% inflation rate down below its target of 2%, and is expected to increase the base rate to 0.75% by the summer.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Following last month’s meeting, MPC member Gertjan Vlieghe said a pick-up in wages and an increase in household debt meant the economy was “ready for somewhat higher interest rates”.
The Bank said in February it would need to raise rates to tackle stubbornly high inflation “somewhat earlier and by a somewhat greater extent” than it had anticipated towards the end of last year and its governor, Mark Carney, has hinted there will be at least two further rate rises over the next three years.
A majority of experts polled by Reuters still think a summer rate rise is likely after the hawkish signals from Bank of England policy makers, “but most don’t see a follow-up move for another year”, says the news agency.
“Part of the hesitation,” says Reuters, “stems from the fact that Britain’s economy has moved from leading to lagging all of its industrialised peers, and is facing its most far-reaching change since the Second World War: leaving the European Union.”
All but one of those polled believed the UK will strike some sort of transition deal with the EU to soften the blow of Brexit.
But while the consensus is that London and Brussels will eventually agree a free trade deal, the second most likely outcome according to the experts is a no deal scenario, meaning Britain would trade with the EU on punishing World Trade Organisation rules.
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Top saunas around the UK
The Week Recommends Finnish-style saunas are popping up everywhere, promising a slew of potential health benefits
By Irenie Forshaw, The Week UK Published
-
'Category 5 beast steers for Florida'
Today's Newspapers A roundup of the headlines from the US front pages
By The Week Staff Published
-
Crossword: October 8, 2024
The Week's daily crossword
By The Week Staff Published
-
Fed cuts rates half a point, hinting victory on inflation
Speed Read This is the Fed's first cut in two years
By Peter Weber, The Week US Published
-
US job growth revised downward
Speed Read The US economy added 818,000 fewer jobs than first reported
By Peter Weber, The Week US Published
-
US inflation drops below 3%, teeing up rate cuts
Speed Read This solidifies expectations that the Federal Reserve will finally cut interest rates in September
By Peter Weber, The Week US Published
-
Is the Fed ready to start cutting interest rates?
Today's Big Question Recession fears and a presidential election affect the calculation
By Joel Mathis, The Week US Published
-
Would Trump's tariff proposals lift the US economy or break it?
Talking Points Economists say fees would raise prices for American families
By Joel Mathis, The Week US Published
-
Will the housing slump ever end?
Today's Big Question Probably not until mortgage rates come down
By Joel Mathis, The Week US Published
-
US inflation cools further in welcome sign for economy
Speed Read Prices fell in June for the first time in four years
By Rafi Schwartz, The Week US Published
-
The big deal: Why are fast-food chains suddenly offering discounts?
Today's Big Question After inflation and price hikes, a need to bring customers back
By Joel Mathis, The Week US Published