London Daily

Focus on the big picture.
Thursday, Jul 10, 2025

Bank of England to wait until 2023 before raising rates

Bank of England to wait until 2023 before raising rates

The Bank of England (BoE) will wait until 2023 before raising Bank Rate from a record low of 0.10%, a Reuters poll found, but economists said there was a chance an increase may come sooner than that on elevated inflation and a strong economic recovery.

During the pandemic the BoE chopped its base lending rate and restarted its printing presses to support the economy, but a mass vaccination programme against the coronavirus has allowed much of the country to reopen.

At its Aug. 5 meeting the BoE kept its stimulus running at full speed, even though it expects inflation to be double its 2.0% target around the end of the year. But it also set out how it could gradually tighten monetary policy.

The Bank said it would start reducing its stock of bonds when its policy rate was 0.50% by not reinvesting the proceeds of maturing debt, as long as that made sense for the economy. The Reuters poll taken between Aug. 9 and 13 found Bank Rate would reach 0.50% in 2023.

All but one economist who replied to an additional question said the Bank would start reducing its stock of purchases in 2023. Its holdings reached the targeted 895 billion pounds in November.

"We think 0.50% is roughly consistent with Governor Andrew Bailey's past comments. But the speed of unwind has the potential to be a little quicker than we might have expected," said James Smith, economist at ING.

Three-quarters, or 15 of 20, of respondents said a rate hike was more likely to come earlier than they expected rather than later. A growing number have pencilled in an increase before the end of next year.

Despite the spread of new coronavirus variants, Britain's economy expanded by 4.8% last quarter and is expected to grow 2.6% this quarter, slightly above the 2.5% predicted in July but below the BoE's projection of about 3.0%.

The poll consensus showed the pace would slow to 1.3% in the December quarter and to 0.8% in the first quarter of 2022.

On an annual basis, growth was pegged at 6.8% and 5.4% in 2021 and 2022, respectively - stronger than the 6.7% and 5.2% forecast in the previous poll.

PRICE RISE


As elsewhere around the world, a spike in inflation is a concern in Britain, especially with the central bank's own projection that inflation would hit 4.0% by end-2021 - its highest in 10 years - having already touched 2.5% in June.

Poll medians showed consumer price inflation at 2.6%, 3.1%, 2.9%, 2.6% in Q3, Q4, Q1, Q2, respectively, higher than in July's poll.

However, the BoE has said the spike in inflation would prove temporary, and most economists agree.

"The inflationary pressures are definitely stronger than most had anticipated earlier this year, but there are some very good reasons to wait this out until the global economy fully recovers from the pandemic and its aftershocks," said Stefan Koopman, economist at Rabobank.

Central bankers will monitor the labour market as the government's furlough programme - that expires at the end of September - could lead to a rise in unemployment in coming months.

More than 85% of 16 respondents said the unemployment rate would take at least a year to reach its pre-COVID-19 level.

Newsletter

Related Articles

0:00
0:00
Close
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
US Imposes New Tariffs on Brazilian Exports Amid Political Tensions
Azerbaijan and Armenia are on the brink of a historic peace deal.
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
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
×