Belfast Telegraph

Confusion reigns over Bank's rate hike plan

Economics experts in Northern Ireland are united in doubt over whether the Bank of England will raise interest rates as the Monetary Policy Committee meet to decide their verdict this week.

The Bank is coming under mounting pressure to raise rates as a result of soaring inflation.

At the February meeting, a majority of the nine MPC members voted to keep rates steady but one member voted for more quantitative easing, one for a half-point rise in rates and two for a quarter-point rise.

If the MPC votes to keep rates on hold at 0.5% for the 24th month in a row, the benchmark bank rate will remain at its lowest level in the bank's 317-year history.

The committee is meeting at the Bank's citadel on London's Threadneedle Street.

Angela McGowan, chief economist at Northern Bank, said it is highly unlikely that the Bank of England will deliver an interest rate hike when the Monetary Policy Committee announces rates tomorrow. "It is most probable that the first rate hike will come in August and not May, which had been initially priced in markets until a week ago," she said.

"Data will probably show that UK industrial and manufacturing production was strong in January, as indicated by the PMI survey.

"But a period of sustained good economic data will be required before any hike is imposed, quite simply one swallow does not make a summer."

Michael Smyth from First Trust also said he believed that the MPC will decide to keep rates on hold.

"While external inflationary pressures like oil and food prices remain strong, there is little evidence of any significant domestic inflationary pressures.

Bank of Ireland's Alan Bridle agreed that a rise was "not a foregone conclusion".

Richard Ramsey, cheif economist at Ulster Bank estimated that there will be a 20% chance of a rate rise, but that he did not expect the MPC to secure a rate hiking majority until May.

Hal Catherwood, head of Brewin Dolphin in Belfast agreed that many in the market have pencilled in May as the likely date.