Economy

HSBC sees two United Kingdom interest rate hikes by end

HSBC sees two United Kingdom interest rate hikes by end”

She said: "We think the bank is clearly signalling it intends to raise rates in November".

The two rate increases predicted by HSBC would take Britain's benchmark interest rate to 0.75 percent by mid-2018.

HSBC said it expected sterling to be weighed down by political uncertainty around Brexit next year, a factor that it said was "now playing second fiddle to the possibility of a cyclical rate rise". We do not think two rate rises will crash the United Kingdom economy. It would be the first hike in United Kingdom rates in a decade. However, while our view on the United Kingdom economic outlook has not changed, the BoE's messaging has: the MPC minutes for the first time alluded to the possibility of a rate rise "over the coming months" in September.

Gertjan Vlieghe - external voting member of the MPC - was previously viewed as one of the Bank's most dovish policymakers, but went on to say that he may back a hike "as early as the coming months".

It also said it no longer saw the euro reaching parity with the pound, which it had previously expected to happen by year-end.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said: "Recent data, the Committee said, had pointed to "a slightly stronger picture than anticipated" for Q3 GDP growth, but it now remains to be seen whether the economy can sustain its limited momentum in the face of the threat of imminent rate rises".

"We have not formally changed our BoE Bank Rate forecast (no hikes in 2017 or 2018), but we will review the forecast in the light of incoming data", Walker said.

But despite investor excitement over the prospect of a pending interest rates hike, HSBC said that the move could ultimately be "premature", forcing the Bank to backtrack and cut rates once again.

A spokesman for Lloyds Banking Group said its economics team should update its view on interest rates in the next few days.

Analysts from the firm predict core interest rates will quadruple from the current low of 0.25 per cent by the end of net year, as the economy picks up speed.

The BoE's next announcement on monetary policy is scheduled for November 2.



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