EY Item Club: Bank of England to hike rates twice this year

Hawkish outlook

The Bank of England (BoE) will raise interest rates twice this year, according to the EY Item Club, despite market expectations of a hike in May falling in recent weeks.

In its Spring Forecast, the EY-sponsored forecasting group said the Monetary Policy Committee's (MPC) pessimism that inflation will return back below its 2% target meant there would be two 25 basis point increases by the end of the year, taking rates to 1%. This prediction is far more hawkish than current market expectations which fell back following BoE Governor Mark Carney's comments last week that a May rate rise was not a "done deal". Furthermore, inflation fell to a 12-month low of 2.5% in March while the report said the recent weather had led to "far from stellar" economic data....