Bank of England raises rates again in February as inflation rises: Reuters poll Reuters

By Jonathan Cable

LONDON (Reuters) – The Bank of England will continue its tight cycle next month as inflation rises above the target and the economic threat of the Omicron coronavirus variant should be lighter than previous mutations, a Reuters poll found.

The UK’s central bank was the first major rate hiker to raise interest rates since the coronavirus pandemic began last month, with many economists expecting stunning markets and delays.

The central bank said it had to act at the time, even when the Omicron variant took over Britain because it saw warning signs of underlying inflationary pressures.

Inflation, which was reported to be almost 30 years old on Wednesday in December, will peak in the next quarter before falling in the third quarter and will not reach the BoE’s 2% target until the second quarter of next year, the poll said. pressure to act on the central bank.

Average inflation forecasts for this quarter and next rose to 5.2% and 5.5%, according to the latest survey released on Friday, from 4.7% and 4.6% published in December.

“Inflation has risen sharply, once again, and it is likely that the Bank of England’s political leaders will be tempted to raise rates in a second consecutive meeting this February,” James Smith told ING.

(Chart, Reuters Poll: UK inflation and interest rate forecasts: https://fingfx.thomsonreuters.com/gfx/polling/lgvdwjzalpo/UK%20inflation%20and%20interest%20rate.PNG)

Markets have a 85% chance of raising the price of the BoE’s top interest rate to 0.50% next month.

Consumers in the UK are facing an additional headache over a 50% rise in energy costs in April, along with rising social security contributions.

Nearly 65% ​​of those surveyed from Jan. 17 to Jan. 20 expected a 25-point rate hike when the BoE’s Monetary Policy Committee meets on Feb. 3 to raise the rate from 0.25 percent to 0.50 percent to 0.50 percent by the end of March. It was over 75%.

Average forecasts showed that the BoE raised its key interest rate by another 25 points in the third quarter – a quarter earlier than the previous month – but will wait until the beginning of next year to rise again to 1.00%, even earlier. was expected.

When asked how much this rate would rise in the current cycle, the median response rate was 1.50%, a level that is still historically low.

Also ready for action, the Federal Reserve https://www.reuters.com/business/fed-raise-rates-three-times-this-year-tame-unruly-inflation-2022-01-20 interest rates will rise threefold. this year, another survey was found by Reuters.

OMICRON

Britain’s economy surpasses pre-pandemic size https://www.reuters.com/world/uk/uk-economy-finally-bigger-than-before-pandemic-november-2022-01-14 November, latest official data showed a week, even though that momentum was probably lost because people stayed home before the holiday season to make sure they were healthy for the Christmas celebrations.

Buyer numbers https://www.reuters.com/business/retail-consumer/uk-shopper-footfall-central-london-drops-30-versus-last-week-2021-12-24 were in central London on Christmas Eve Last Friday 30.3% less than according to Springboard data.

Economic growth is expected to slow to 0.6% this quarter, after rising 1.0% at the end of 2021, according to a survey. It will then grow by 0.9% in the next quarter, slowing to 0.7% and 0.6% in the next two quarters.

GDP growth for 2022 was set at 4.5%, a median of 66 economists indicated, and by 2023 it was set at 2.2%. This is after the expected 7.0% expansion last year.

Prime Minister Boris Johnson, with growing calls to quit a number of scandals, took a light touch on Omicron, failing to impose drastic measures on previous waves. On Wednesday it announced the end of most COVID-19 restrictions.

So when asked what effect the Omicron variant would have on the Delta variant, except for three of the 24 respondents to an additional question, they said it would be lighter or much lighter.

(Chart, Reuters Poll: UK Economic Forecast: https://fingfx.thomsonreuters.com/gfx/polling/akpezewxbvr/Omicron.png)

“As we move into the spring, I think there will be a protection of confidence that COVID-19 cases will be slightly lower and we have a whole economy of people who want to go out and spend money,” George Buckley told Nomura.

“It suggests that consumer spending will increase, especially spending on services, when we stop buying things and start buying experiences.”

(For other Reuters global economic survey stories 🙂