BOE Will Raise Interest Rates Three Times in 2022, Goldman Says

(Bloomberg) -- The Bank of England will raise borrowing costs three times next year, bringing the benchmark interest rate to 1%, according to economists at Goldman Sachs Group Inc.

The first increase will come in February, the economists said, revising their outlook after the central bank unexpectedly hiked rates on Thursday by 15 basis points to 0.25% to curb a surge in inflation. 

The BOE now has a “desire to tighten policy,” economists led by Steffan Ball wrote in a report. “We now think 25-basis-point hikes are likely in both February and May, conditional on the economic impact of the omicron variant being moderate and roughly in line with our baseline projection.”

“After this, we expect the Monetary Policy Committee to pause for six months before increasing Bank Rate to 1% in November 2022. Compared to our previous forecast, we now expect one additional hike by the end of 2022.”

Thursday’s decision made the BOE the first central bank across the Group of Seven major economies to raise borrowing costs since the pandemic struck.

The U.S. bank added that the BOE would now cease reinvestments of maturing assets from its quantitative easing program from March, having said they would stop doing so once rates hit 0.5%.

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