Money in United Kingdom

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United Kingdom - Money

BoE hikes by 50 basis points in December

On 15 December, the Bank of England (BoE) increased the bank rate from 3.00% to 3.50%, marking the ninth successive rate hike.

The Bank’s decision to tighten its stance was driven by the desire to tame inflation, which is currently in double digits and more than five times the Bank of England’s 2.0% target. The tight labor market and recent acceleration in private-sector pay growth also underpinned the Bank’s decision.

The Bank reiterated its previous guidance that “further increases in Bank Rate may be required for a sustainable return of inflation to target”. The Consensus is for the Bank Rate to peak at slightly over 4% in mid-2023, with forecasts for the peak level ranging from 3.75% to 4.50%.

Analysts at Goldman Sachs are at the hawkish end of our panel:

“Looking ahead, we continue to expect another 50bp hike in February, followed by 25bp hikes in March and May for a terminal rate of 4.5%.”

ING’s James Smith is more dovish:

“For now, our best guess is the Committee implements another 50bp hike in February before calling it a day. The hawks can continue to point to 6% wage growth and the fact that core services inflation is running higher than expected in November. But today’s meeting is a further demonstration of the delicate balancing act facing the BoE, between mitigating the risks of a tight jobs market on the one hand against mounting concerns about the housing market and the health of corporate borrowers on the other. We expect Bank Rate to peak at 4% in the new year.”

United Kingdom - Money Data

2015   2016   2017   2018   2019  
Money (annual variation in %)5.9  3.1  3.1  3.8  3.9  

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United Kingdom Money Chart

United Kingdom Money
Note: Annual variation of M2 in %.
Source: Bank of England (BoE).

United Kingdom Facts

Value Change Date
Bond Yield0.83-3.04 %Jan 01
Exchange Rate1.33-0.35 %Jan 01

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