Economists forecast another 0.5-point rate rise next month

The Bank of England will announce another interest rate rise of half a percentage point next month and inflation will peak at 11.4 per cent this year, experts have predicted.

The central bank is expected to raise rates in September by its joint-highest margin in 27 years to 2.25 per cent, according to a poll of economists. All 50 economists surveyed by Reuters expect the Bank to raise rates at its next meeting. Thirty predicted that the Bank would raise its base rate by 50 basis points, while the rest expected rates to rise by 25 basis points to 2 per cent.

Most of those who said the Bank would raise rates by 50 basis points expect rate rises to slow to 25 basis points from the following meeting in November.

The Bank was the first of the world’s big central banks to begin to increase the cost of borrowing at the end of last year. Since then, there have been six rate rises, with the latest one at 50 basis points.

The Bank expects inflation, which reached 9.4 per cent in June, to hit 13.3 per cent in October, its highest level since 1980, when people receive their winter energy bills. These are expected to be about three times as high as they were in the autumn of last year. However, the economists believe inflation will be slightly lower at 11.4 per cent in the final three months of the year, after averaging 9.6 per cent between July and September. Borrowing costs will end the year at 2.5 per cent, where they will remain until they are cut in 2024, according to the average forecast.

The Bank said in its latest Monetary Policy Report, which was published this month, that the economy would enter a 15-month recession this winter as inflation eroded demand and caused a downturn.

Ruth Gregory, at Capital Economics, the consultancy, said: “We expect a recession in 2022-23 to be driven by high inflation, with a contraction in real consumer spending at its epicentre, but with household and corporate balance sheets still relatively healthy, we suspect the recession will be mild by historical standards.”

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Economists forecast another 0.5-point rate rise next month