Goldman sees Bank of England rate hike in May, possibly more ahead

THE Bank of England (BOE) looks set to raise interest rates in May and possibly again after that as it grapples with stubbornly high inflation, analysts at Goldman Sachs said on Monday (Apr 24).

Britain’s consumer price inflation stayed in double digits at 10.1 per cent in March, showed official data published last week.

The Goldman analysts revised up their forecast for core inflation at the end of this year to 4.7 per cent from a previous December 2023 forecast of 4.3 per cent, but lowered their estimate for December 2024 to 2.9 per cent from 3.1 per cent.

“Persistent inflationary pressures, continued strength in wage growth and resilient activity data suggest that a 25-basis-point BOE hike at the upcoming May meeting is very likely, and our analysis points towards significant risk that more tightening may be needed beyond that,” they said.

Investors are currently putting a 98 per cent probability on a 25-basis-point rate hike by the BOE to 4.5 per cent on May 11 and see a roughly 50-50 chance of two further quarter-point hikes by August which would take Bank Rate to 5 per cent. REUTERS