Bank of England warns interest rates set to rise sooner and faster, as economists forecast May hike

Bank of England warns interest rates set to rise sooner and faster, as economists forecast May hike


The Bank of England said interest rates will need to rise faster and sooner than previously projected, with the next increase now expected in May.

Monetary policymakers unanimously voted to hold the base rate at 0.5% in February but used the latest inflation report and update to warn the next hike will come earlier than thought last year, if the economy continues on its current path.

It comes after economic growth jumped by 0.5% in the final three months of 2017, while inflation is at 3% – one per cent higher than the Bank’s target of 2%.

The Bank’s Monetary Policy Committee (MPC) has now revised up its forecasts for growth in 2018, 2019 and 2020.

Stronger wage growth has also been predicted – and inflation is expected to remain high.

In a statement the Bank said: “The Committee judges that, were the economy to evolve broadly in line with the February inflation report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target.”

Next rate rise expected in May

The Bank hiked interest rates for the first time in a decade in November last year and said further increases would be gradual with markets at that time expecting the next rise in the second half of 2018.

But it now looks as though the first of two, or three hikes, could come in the first half of this year.

Paul Hollingsworth, senior UK economist at Capital Economics, said: “Today’s releases pave the way for an interest rate hike in May, and we think that the MPC will hike a further two times this year, taking Bank Rate to 1.25%.”

Ben Brettell, senior economist at Hargreaves Lansdown, added: “The Bank’s rhetoric echoed that of September’s meeting minutes, which preceded the November rate hike.

“It now looks like the next rise could happen as soon as May – the next time the Bank’s economic forecasts are due to be updated.

“On the subject of Brexit, the Bank sounded a note of caution, saying it remained the key source of uncertainty.

“Future decisions on interest rates will therefore depend heavily on progress in negotiations with the EU.”

The pound jumped at the prospect of higher interest rates.

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.


Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.


Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.


Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.

Email Newsletter

Sign up for our newsletter

Latest Poll

Brokers: How are service levels of free legals? Vote now

There is much more to Mortgage Solutions…

For just two more minutes of your time, you can register for premium access

  • Specialist lending newsletters
  • Access to exclusive content
  • Priority event notifications
  • Business information tailored specifically to your business needs
  • Engage in interactive commenting and voting in our weekly polls

Specialist Lending Newsletter

You may also be interested in the Specialist Lending Solutions newsletter. All the latest news, analysis and insight from the mainstream residential lending market. Including industry news, adviser business strategy tips and market commentary.

please sign-in using your email and password

Register to gain access to for the latest news analysis, interactive comment, industry video and features, all at your finger tips. Vote in our polls, get your opinion across on the news and watch out for our weekly editorial round-up features.

Thank you. You have successfully registered for Premium access, please check your email for your temporary password. (Please also check your spam or trash folders)

It appears that you are not registered to view this page. Please simply log in or if you are new to the site, please register to access this page

Newsletter Sign-Up

You are already registered for our newsletter. If you don’t receive the emails, please contact or call 0203 815 3683.