Bank of England chief economist says markets expect three more rate rises
Chief economist Huw Pill said financial markets are pricing in three additional interest-rate hikes after the Bank raised its base rate to 4%, while noting the current shock is smaller than in 2022.
The Bank of England raised its base rate from 3.75% to 4% on Tuesday, the first increase in more than three years. Chief economist Huw Pill said markets are now pricing in three further rate hikes, although he cautioned that the magnitude of the current economic shock is smaller than the series of hikes in 2022.
Pill noted that gas price increases have been less severe than during the previous surge and added that the Bank will monitor whether higher energy costs lead to higher retail prices or wage growth. He said evidence of these “second-round effects” is expected to emerge in the spring of 2027 and will influence decisions on future rate moves.
Governor Andrew Bailey said borrowers are not facing an “inevitable long sequence of hikes,” but warned that the latest increase may not be the last unless geopolitical tensions in the Middle East are resolved. Both officials said the ultimate number of hikes could be more or fewer than three, depending on economic developments.