UK interest rates to peak at 5.5% in September, economists predict

A fresh poll of economists by Reuters suggests the Bank will approve a 15th consecutive increase in interest rates at its next meeting on 21 September as part of efforts to combat price inflation, which is still more than three times higher than its 2% target.

All but one of the 62 economists surveyed said they expected the Bank’s base rate to rise by a quarter of a percentage point next month, taking rates from 5.25% to 5.5%. The only outlier expected a half-point hike, which would take rates to 6%.

The Bank has been raising rates at a clip in an effort to lower surging inflation, which peaked at 11.1% last October and has since eased to 6.8% in July.

The Reuters poll shows that economists expect inflation to average at 6.8% this quarter, before falling to 4.7% in the fourth quarter. It is not forecast to drop below the 2% target until at least 2025.

However, policymakers must consider the consequences of further rate hikes. Higher borrowing costs have weighed on the housing market – as consumers avoid costlier mortgages – and private sector activity across the UK.

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REUTERS