The financial markets have been pricing in four quarter-point increases, which would take Bank Rate from its current 3.75% to 4.75%.<\/p>\n
Despite regularly arguing for higher interest rates in the past, the Bank\u2019s chief economist, Huw Pill, says he is \u201csceptical\u201d that such substantial increases will be necessary.<\/p>\n
Speaking at the International Monetary Fund\u2019s annual meeting in Bangkok, the Times<\/em> reports he questioned the markets’ expectations, saying: \u201cBut is four hikes appropriate over the next year?\u201d<\/p>\n The concern is that the conflict in the Middle East and elevated energy prices could lead to businesses increasing their prices and workers demanding higher wages, creating more persistent inflation.<\/p>\n Annual UK inflation is currently well above the Bank\u2019s 2% target at 3.1% and is expected to exceed 4% early next year.<\/p>\n \u201cTo get 100 basis points [of rate rises], we need a concrete manifestation of these risks [to wages and prices],\u201d Pill said, adding that more evidence would become available over the next six to nine months.<\/p>\n At a later panel discussion, he also warned against assuming an initial increase would trigger a prolonged series of rises similar to those seen in 2022 and 2023.<\/p>\n \u201cWe shouldn’t give the impression that because we act now, we are on another staircase … It’s a different shock,\u201d he said.<\/p>\n Despite questioning the scale of future increases, Pill remains in favour of raising the Bank Rate now to prevent inflation becoming entrenched.<\/p>\n \u201cIt would have been good to move early and influence market expectations, and send a clearer signal we were active and agile.\u201d<\/p>\n At its September meeting, the Bank\u2019s nine-member Monetary Policy Committee voted 6\u20133 to leave rates unchanged at 3.75%, with Pill among those calling for an increase to 4%.<\/p>\n Whatever happens to Bank Rate in the longer term, the financial markets currently regard a quarter-point rise at the next meeting on 5 November as highly likely.<\/p>\n And the market\u2019s expectations of future interest rate increases have pushed up wholesale swap rates, which lenders use to price fixed-rate mortgages.<\/p>\n According to Moneyfacts, the average five-year fixed mortgage rate reached 6% in early October for the first time in approximately three years.<\/p>\n Pill’s comments could help ease expectations of further interest rate increases, although there is not yet any evidence of a sustained fall in swap rates.<\/p>\n Higher borrowing costs have already had a dampening effect on the housing market, restricting affordability for buyers and increasing refinancing costs for both homeowners and landlords.<\/p>\n According to Rightmove, buyer demand in September was 9% lower than a year earlier, while the number of homes for sale was at a 12-year high for the time of year.<\/p>\n The next UK inflation figures are due on 21 October, ahead of the Bank\u2019s interest rate decision on 5 November.<\/p>\n","protected":false},"excerpt":{"rendered":" The prospect of four interest rate rises over the next 12 months has been questioned by one of the Bank of England\u2019s more hawkish policymakers. The financial markets have been pricing in four quarter-point increases, which would take Bank Rate from its current 3.75% to 4.75%. Despite regularly arguing for higher interest rates in the… Read more »<\/a><\/p>\n","protected":false},"author":4233,"featured_media":6108345,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[59,4,26,765],"tags":[450],"class_list":["post-6108339","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trending-news","category-investment","category-tax-mortgages-money","category-property-investment","tag-base-rate"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6108339","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/users\/4233"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/comments?post=6108339"}],"version-history":[{"count":3,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6108339\/revisions"}],"predecessor-version":[{"id":6108347,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/posts\/6108339\/revisions\/6108347"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/media\/6108345"}],"wp:attachment":[{"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/media?parent=6108339"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/categories?post=6108339"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-gb\/wp-json\/wp\/v2\/tags?post=6108339"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Why is Pill questioning the forecasts?<\/h2>\n
Is a November rate rise still likely?<\/h2>\n
What does this mean for mortgage rates?<\/h2>\n