Bank of England to hike rates at back-to-back meetings for first time since 2004

The Bank of England will this week hoist interest rates at back-to-back meetings for the first time since 2004, City economists are betting.

The Bank will reinforce its sharp policy shift to zeroing in on rampant inflation at its meeting of rate setters this Thursday after it hiked rates for the first time in over three years in December.

Threadneedle Street’s policy pivot from focusing on supporting the British economy though the pandemic to clamping down on a worsening cost of living crisis marks the Bank “turning the page” on ultra-stimulative measures, according to Sanjay Raja, senior economist at Deutsche Bank.

Latest figures from the Office for National Statistics reveal that inflation has never been further away from the Bank’s two per cent target, hitting 5.4 per cent in December, the highest rate in nearly 30 years.

Inflation is expected to peak above seven per cent in April, led higher by the energy regulator hoisting the cap on energy bills by as much as 50 per cent, igniting a flurry of City economists to predict a strong hawkish tilt from the Bank this year.

Financial markets are pricing in five rate hikes from the Bank this year, taking borrowing costs to 1.5 per cent by the end of 2022.

The world’s top central banks are preparing to launch a rapid cycle of rate hikes and balance sheet shrinkage to wean the global financial system off the wave of cheap money unleashed during the pandemic.

Across the pond, the US Federal Reserve set out its intent to get on top of inflation – running at seven per cent in America, the highest rate since the 1980s – at its meeting of policymakers this week.

Fed Chair Jerome Powell told financial markets to buckle in for a rate hike spree in 2022, starting at the world’s most influential central bank’s next meeting in March.