The Bank of England will raise Bank Rate to 4.0% in November, according to a majority of economists in a Reuters poll. Most reversed course because of persistently high inflation, but there is still no majority for a further rise after that.
The Bank of England will raise Bank Rate for the first time in more than three years to 4.0% in November, according to a majority of economists polled by Reuters. Reuters says they reversed course on a rate rise this year because of persistently high inflation.
Economists reverse course on a 2026 hike
54 of 63 economists polled between October 12 and 14 forecast a 25 basis point increase next month, which coincides with the central bank's next set of quarterly forecasts. In last month's survey, about 90% of respondents forecast rates to stay on hold for the remainder of the year.
Inflation sits at 3.1% and is forecast to rise to roughly double the target, Reuters reports, and it has broadly been above the BoE's 2.0% target for more than five years. Most economists say it is now time to increase borrowing costs.
Sonali Punhani, UK economist at Bank of America, recently changed her view from hold to a hike. According to Reuters, she said: "The bigger pickup in inflation is still ahead of us rather than behind us."
Few expect a second increase
Economists have been more guarded than financial market traders. Markets are fully pricing in four quarter-point rate rises by the end of next year, yet there is no majority among economists for a further rate hike beyond November.
Nearly half of economists polled, 30 of 61, expected one more rise in the first quarter of 2027. BoE Governor Andrew Bailey, who so far has been reluctant to vote for a rise, dropped a clear hint at the last Monetary Policy Committee meeting that higher rates were likely.
Inflation forecasts move higher
Economists now see British inflation averaging 3.6% this quarter and 3.8% next, and 3.0% for calendar year 2027, revised up from 3.3%, 3.2% and 2.5% in last month's poll. Higher inflation expectations have driven a surge in government bond yields around the world, taking British government borrowing costs to their highest in decades ahead of the October 28 budget.
The growth outlook changed less: economists made only a modest upward revision to this year's growth forecast to 1.3%, up from 1.1%.
Source: Investing.com (Reuters)
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