BOE Hikes Interest Rate Expectations Amid Stronger Economic Growth

The Bank of England is likely to increase interest rates as many as four times within the next year, following unexpected economic growth in July. According to City figures, the central bank will be boosted by the GDP figures, which showed a 0.4% increase despite forecasts of stagnation.

Andrew Bailey's Monetary Policy Committee (MPC) is expected to leave rates unchanged when it meets next week, but many economists believe that an interest rate hike in November is becoming more likely.

Money markets are pricing in four quarter-point hikes by July next year, which would see the Bank rate rise from 3.75% today to 4.75% in less than 12 months. This could be a response to higher energy costs being passed on as higher prices by businesses and consumers.

Economists had expected summer spending boosts to recede in July, but the GDP figures suggest that the UK economy can withstand a hike to rates this year. Andrew Wishard, an economist at Berenberg, said: 'Evidence that [the] economy could cope with a solitary 25bp interest rate hike adds to the risk that the BoE will deliver one in November or December.'