Bank expects double interest rate hike by 2019


The proportion of people who expect Brexit to result in an increase in their own household spending actually rose relative to the second half of 2016, but the Bank said this was likely to reflect higher inflation this year, stemming from the plunge in sterling on the night of the referendum.

The online survey of 6,018 households was considered by the Bank's monetary policy committee before it voted to raise rates on 2 November.

The "very gradual" pace of tightening signalled by the BoE last month reflects both uncertainty about the economic impact of ongoing talks to leave the European Union, as well as weak underlying inflation pressures that belie a headline rate at its highest in almost six years.

The Bank of England held its main interest rate at 0.50% in December, a unanimous decision by the Monetary Policy Committee that was widely expected by the market.

Capital Economics research group concluded that "the MPC sounded more optimistic on Brexit, noting that recent progress in the negotiations has reduced the "likelihood of a disorderly exit" from the European Union".

The BoE stuck to its view from last month that interest rates were likely to need to rise gradually.

The Bank raised rates for the first time in more than 10 years last month, pushing up interest rates to 0.50% from 0.25%. The BoE said this marked the start of a very gradual tightening cycle as the economy comes close to running at full capacity.

British inflation has hit its highest level in nearly six years, official data showed Tuesday.

A major new survey for the Bank of England has found that the British public has become more pessimistic about the economic impact of country's withdrawal from the European Union (EU).

Last month the BoE said it expected the economy to grow by 1.6 percent next year, unchanged from what it expects for 2017 and somewhat faster than the government and most economists polled by Reuters expect.

Last month the MPC chose to raise interest rates for the first time in 10 years.

Consumer demand has faltered this year mostly due to rising inflation - not Brexit worries - so last week's agreement removed a downside risk, rather than pointing to stronger growth, economists have said.

"What very little data we've had has shown that the economy has moved broadly in line with recent quarters near its trend rate of growth and inflation is roughly in line with the BoE's projection".

Britons are seeking bargains in the run-up to Christmas, with official data on Thursday revealing that United Kingdom retail sales surged last month thanks to Black Friday's heavy discounting.

The increase of 2.3 per cent falls short of the expected 2.6 per cent.

The November Inflation Report predicted modest growth in GDP over the three-year forecast period, at a pace just above its reduced rate of potential.

However Wolfgang Bauer, a fixed income fund manager at M&G Investments, said Brexit made the BoE the hardest major central bank to predict for next year based on economics alone.