MNI BRIEF: NIESR One More BOE Rate Hike, Sticky Inflation

The Bank of England Monetary Policy Committee will only deliver one more 25 basis point rate hike, with Bank Rate peaking at 5.5%, the National Institute of Economic and Social Research predicts, while suggesting the MPC should signal it had done enough on rates rather than clinging to its current 'data dependent' line.

NIESR head Jagjit Chadha made the point Wednesday that as policy is forward looking, rate moves should be forecast dependent and not data dependent. The BOE has commissioned a review chaired by former Fed head Ben Bernanke into its forecast procedures with communication of the Bank's forecasts in the spotlight.

NIESR's latest quarterly forecasts predict inflation would return only slowly towards target, with headline CPI inflation at 5.2% at the end of this year and 3.9% at the end of 2024. GDP growth is expected to be sluggish over the next three years, at 0.4% in 2023, 0.3% in 2024 and 0.6% in 2025 with risks to the downside and an even chance of a recession by the end of this year. The institute foresees the level of GDP not exceeding its pre-pandemic level, in Q4 2019, until the third quarter of 2024, marking five years of lost growth.