London Daily

Focus on the big picture.
Wednesday, Jul 09, 2025

Bank of England to lift rates to 4% on Feb 2, finish at 4.25% in March - Reuters poll

Bank of England to lift rates to 4% on Feb 2, finish at 4.25% in March - Reuters poll

The Bank of England will lift the Bank Rate by 50 basis points on Feb. 2 to 4.00% and then add another 25 basis points in March before pausing, according to a Reuters poll of economists who said the greater risk was that it would do even more.
Britain's central bank was one of the first among global peers to begin raising borrowing costs and has added 340 basis points since it began the current cycle in December 2021 to tame inflation now running at more than five times its 2% target.

Prices jumped 10.5% in December from a year earlier, official data showed last week, as food and drink prices increased at their fastest pace since 1977.

A firm majority, 29 of 42 respondents to the Jan. 18-24 poll, said the Bank would add 50 basis points next Thursday. Thirteen opted for a more modest 25-basis-point rate rise.

Median forecasts in the poll showed the Bank would then add 25 basis points in March, giving a peak rate of 4.25%. It was last over 4.00% in late 2008.

Both the United States Federal Reserve and the European Central Bank are also nearing the end of their policy tightening campaigns, separate Reuters polls found.

Markets are pricing in a peak of 4.50% for Bank Rate. Governor Andrew Bailey said last week there was now more optimism about the prospects for inflation falling this year, noting the BoE had not pushed back against market expectations.

Inflation has proved sticky, however. When asked about the risks around their peak rate forecasts, 20 of 24 respondents to an additional question said the greater risk was that Bank Rate ends higher than they expect rather than lower.

"More resilient growth versus our forecasts should mean core inflation is likely to be stickier and give some space or force the BoE to hike a bit more than we forecast," said Raphael Olszyna-Marzys at J. Safra Sarasin.

Inflation has likely already peaked, but according to the poll it won't fall to the Bank's target until the end of next year. It will average 7.0% this year and 2.5% in 2024, the poll found, but will drop to 1.9% across 2025.

RECESSION

Britain's economy is almost certainly heading for a recession, with the poll giving that scenario a strong 75% chance within a year, albeit lower than the 85% probability given last month.

Gross domestic product contracted 0.3% in the third quarter but the poll said it flatlined last quarter, thus just dodging the technical definition of a recession.

However, the poll showed GDP falling 0.3% this quarter and next and 0.1% in the third quarter.

Still, when questioned, 20 of 24 respondents said the downturn was more likely to be shallower than they currently expect rather than deeper.

Across this year, the economy was predicted to contract 0.9% before growing 0.8% in 2024.

"The consumer will struggle in 2023, with the UK likely in a mild recession for much of this year as the lagged impact of higher interest rates quells growth prospects, adding to the effects of the cost-of-living crisis," said Ellie Henderson at Investec.

Workers, from rail staff and healthcare workers to teachers, have been taking industrial action to demand better pay as they face soaring costs.
Newsletter

Related Articles

0:00
0:00
Close
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
Poland Implements Border Checks Amid Growing Migration Tensions
Political Dispute Escalates Between Trump and Musk
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
US Senate Votes to Remove AI Regulation Moratorium from Domestic Policy Bill
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
Jury Deliberations in Diddy Trial Yield Partial Verdict in Serious Criminal Charges
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
×