london skyline

United Kingdom Monetary Policy December 2022

United Kingdom: 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 Banks 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 Englands 2.0% target. The tight labor market and recent acceleration in private-sector pay growth also underpinned the Banks 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%.”

INGs 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 todays 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.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest