MOST economists now expect the Bank of England to raise benchmark UK interest rates at the Monetary Policy Committee’s next meeting in November, a survey has revealed.
However, the majority of economists believe such a move by the MPC would be a mistake, the poll published yesterday shows.
Of 50 economists surveyed by Reuters, 31 forecast the MPC will at its November 2 meeting implement the first rise in UK base rates for more than a decade, increasing them from a record low of 0.25 per cent to 0.5 per cent.
However, 35 of 47 economists believe now is not the time to be increasing borrowing costs.
In a poll conducted before the MPC’s meeting last Thursday, only three of 59 economists had predicted a rise in base rates by the year-end. And only around a dozen economists had forecast at that stage that there would be one or more rate rises by the end of 2018.
After the MPC held base rates last Thursday, with seven members supporting no change and two preferring a rise, the Bank said: “A majority of MPC members judge that, if the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflationary pressure then, with the further lessening in the trade-off that this would imply, some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target.”
Annual UK consumer prices index inflation had by August surged to 2.9 per cent, from 0.3 per cent in May last year, fuelled by sterling’s post-Brexit vote tumble. UK growth has slowed sharply in the first half.
A bigger-than-expected one per cent month-on-month increase in retail sales volumes in August, revealed in figures published yesterday by the Office for National Statistics, was viewed by economists as raising the likelihood of a rate rise in November.
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