Bank of England predicted to raise interest rates one more time in May
The Bank of England is likely to increase interest rates one more time in May, to 4.5%, before inflation falls “sharply” over the rest of the year, a former rate-setter has predicted.
Michael Saunders, who was a member of the monetary policy committee until August, said the UK was nearly at a “turning point” for interest rates, which have risen sharply over the past year as policymakers tried to curb a surge in prices caused by an increase in energy costs.
He said his former colleagues at the Bank of England would most probably vote for a final increase in May – which would be the 12th in a row – before holding interest rates steady over the following months. “I think they’ll raise interest rates again at the May meeting another 25 basis points … That’ll take interest rates up to 4.5%,” Saunders said.
“I think we get this further, probably final, hike in May, and then probably a long period in which interest rates are fairly stable. The big tightening cycle – interest rates going up meeting after meeting – I think that’s largely over and what you’ll see over the rest of this year is inflation crawling lower, interest rates stable.”
Households are likely to breathe a sigh of relief if Saunders’ predictions prove correct, given most have seen bills for groceries, heating and other essential goods soar in recent months. The increases after Russia’s full-scale invasion of Ukraine have piled pressure on the poorest households in Britain, who spend a larger share of their income on essentials.
Saunders said: “The overwhelming factor behind the rise in inflation has been the surge in energy prices – that’s lifted households’ gas and electricity bills, pushed up firms’ cost. So [they’ve] seen a ripple through to higher services
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