Deutsche Bank Sees Two Rate Hikes Ahead in November and February

Deutsche Bank has revised its forecast for UK interest rates, now predicting two quarter-point hikes by November and February. The bank's economists attribute this shift to the September policy decision, which suggests that the central bank is growing less tolerant of elevated inflation.

The hikes are expected to be 'insurance hikes' rather than the start of a sustained tightening cycle. The outlook remains dependent on energy prices. UK inflation rose to just over 3% year-on-year in August and Deutsche Bank expects it to reach around 4% by year-end.

Deutsche Bank's analysis is based on the Monetary Policy Committee's voting split, which was unchanged from July. Most MPC members judged that financial conditions are already providing a sufficient degree of monetary restraint. This could raise the hurdle for further rate increases.