Bank of England likely to raise interest rates in May

In its quarterly inflation report published today, the Bank of England warned that future increases to interest rates will be larger and more frequent in future.

The warning from Mark Carney, the central bank’s governor, said the rises, likely to start in May, will be necessary to head off the threat of UK inflation from the headwinds of a more vigorous world economy.

The strongly assertive report sent the pound rising again against the dollar, as the bank’s Monetary Policy Committee stated they would no longer tolerate inflation rising above its 2% target.

Carney, in a letter to the British Chancellor, or finance minister, said: “Monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November report.”

The pound jumped 0.79% on the news, to $1.39. Sterling reached its highest value against the dollar since Britain’s vote to leave the EU, crossing the psychologically important threshold of $1.40 for several days, before slipping back slightly.

Christopher Copper-Ind
Christopher Copper-Ind is Editor of International Investment.

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