London: Faster UK inflation is putting the Bank of England on track for a rate hike.
That’s according to the latest Bloomberg News survey of economists, which has 65 percent forecasting that the next move in the benchmark interest rate is more likely to be an increase rather than a cut. But any such move may be some time away, with the median forecast in a separate poll showing no rate change until 2019.
BOE policy makers are facing a sharp pickup in consumer-price growth because of the pound’s drop since the Brexit vote, with data next week forecast to show an acceleration to 1.4 percent, the strongest since 2014.
That’s just one concern for Governor Mark Carney, who will deliver his first speech of the year on Monday evening, and is keeping a neutral bias on rates as he monitors the potential economic fallout from the decision to quit the European Union.
“Inflation is going to move up quite markedly as we get toward the middle of the year,” Victoria Clarke, an economist at Investec Securities Plc in London, said in a telephone interview. “So for us, certainly not this year or next but down the line, the next move is up rather than down.”
As the pound’s depreciation and higher oil costs feed through to UK shops, the BOE expects inflation to breach its 2 percent goal within months. That may make life uncomfortable for policy makers, who are trying to balance the trade-off between supporting the economy and making sure price expectations don’t become dislodged.
The inflation data on Tuesday will come hours after Carney speaks on the BOE’s future policy challenges on Monday evening in London. The governor may give his latest thinking on the outlook after the UK economy surprised many with a stronger-than-expected performance since the Brexit vote.
