Economist have said that the Bank of England could raise interest rates to 4.5% as inflation remains high due to soaring food prices and the labour market is “still tight” with “wage growth.”
In March the Consumer Prices Inflation (CPI) has remained in double digits which was not expected, which placed more pressure on struggling households.
As a result the Monetary Policy Committee (MPC) may well raise interest rates from 4.25% to 4.5% during the next meeting this Thursday and there are warnings that it could be raised again this year to a peak of 4.75% or even 5%.
Chief UK economist Andrew Goodwin said, “Ahead of the May meeting, the Monetary Policy Committee (MPC) can justifiably argue that the criteria for tightening monetary policy further, that it set out in the March policy statement, have been met: the labour market is still tight and wage growth and services inflation remain stubbornly high.”
Laith Khalaf, head of investment analysis at AJ Bell, said, “CPI still stands in double digits, which means that everyone is expecting a rate hike from the Bank of England at the forthcoming policy meeting.
“In stark contrast to the US, markets are then expecting one further rate hike, possibly two, to be pushed through.
“The UK’s headline inflation rate is running around twice that in the US, so it’s easy to see why we might have to swallow another few doses of monetary medicine.”