Steve Matthews, Liquidity Fund Manager at Canada Life Asset Management expects the Bank of England (BoE) to raise its Base Rate by 25bps to 4.75% on Thursday.
He said: “We have seen a round of hikes from most major central banks in recent weeks as they try to slow economic activity and tamp down inflation.
“In the UK, The Bank of England (BoE) is seeing energy costs fall, but this being offset by stubborn wage numbers and whilst some supermarkets have this week introduced price cuts, the previous jumps in food prices have ensured that core inflation is still on the rise.
“This would indicate the need for further aggressive action to curb spending, but with an estimated 800,000 fixed rate mortgages expiring before the end of the year, the BoE will be wary in finding the equilibrium between slowing the economy and forcing an abrupt crash.
“Markets are pricing in five further hikes before the end of the year with speculation that there is scope for a 50bps rise somewhere along the way. On balance, we expect the BoE to raise its Base Rate by 25bp on Thursday to take it to 4.75% and subsequent hikes in August and September to take the rate to 5.25% in the event that the economy does not rapidly cool over the summer.”
