The Bank of England (BoE) is expected to say on Thursday that another rate hike could be nearing as the country’s economy grows faster than expected ahead of its departure from the European Union.
The BoE raised borrowing costs for the first time in more than a decade in November, reversing a cut made in 2016 as the country reeled from the Brexit vote shock and taking them back to 0.50 per cent.
The sixth largest economy of the world is lagging behind a strong global pick-up, due to a rise in inflation and fall in business confidence since the referendum, reports Reuters.
But it has fared better than most forecasts made at the time of the Brexit vote, and it ended 2017 stronger than the BoE expected.
The central bank has said it plans to gradually scale back its emergency levels of stimulus.
It is widely expected to keep rates on hold on Thursday as it weighs up the impact of November’s move on the economy.
Investors see a nearly 50-50 chance of a new hike in May and some economists are predicting two increases this year alone.
That would represent a big change from the BoE’s signal as recently as November of two hikes over the next three years.
Prime Minister Theresa May wants to clinch a transition deal next month to secure full access for Britain to EU markets for about two years after it leaves the bloc in March 2019.