The Bank of England (BoE) will likely shy away from a bigger interest rate rise in August and instead stick to the more modest 25 basis point increases it has been delivering, but it is a very close call, per the latest Reuters poll of economists.
Key findings
A slight majority in the July 13-25 Reuters poll – 29 of 54 economists – said the BoE will stick to 25 basis points at its next meeting on Aug. 4, to 1.50%. The remaining 25 forecast 50 basis points, which would put it more in line with its peers.
Among gilt-edged market makers, the narrow split was reversed. Of the 15 who responded, eight forecast a 50 basis point hike, while seven saw a 25 basis point hike.
A majority of respondents expect Bank Rate to end the year at 2.25% or higher, compared with 1.75% in the previous poll.
The poll gave a median 55% chance of a recession in the coming year, up sharply from 35% in the June poll. But that was based on a small sample of 11 respondents, with several declining to answer as they thought the recession was already here.
The poll suggested inflation, currently at a 40-year high of 9.4%, would likely peak in the fourth quarter, when it is expected to average 10.2% – five times the BoE’s 2% target.
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