Bank of England to publish latest verdict on UK economy and interest rates


The Bank of England will unveil its latest verdict on the UK economy and interest rates today amid mounting speculation over growing policymaker support for a hike in the cost of borrowing.

It will publish its keenly-awaited quarterly inflation report, as well as the latest Monetary Policy Committee decision on rates and the minutes disclosing how MPC members voted last month.

Experts are predicting rates to be held once more at 0.5%, although some believe signs of a pick up in the economy may prompt another MPC member to back the case for an interest rate hike.

The MPC has voted 8-1 to hold rates for the past three months, with Ian McCafferty the sole dissenter, calling for a rise to 0.75%.

But robust surveys from the services, manufacturing and construction sectors this week have boosted the chances of a pick up in growth, as well as showing further signs of a recruitment revival, which could see more policymakers join Mr McCafferty in voting for a rate rise.

Investec experts believe fellow rate-setter Kristin Forbes may call for a hike, having recently warned that rates need to rise "sooner rather than later".

She cautioned in August of the dangers of "lingering too long in the sun" with low interest rates, saying that waiting too long for an increase risked undermining the recovery.

Experts believe it will not be until well into the first half of next year when the majority of MPC members call for a rate hike, extending ultra low interest rates for borrowers, but heaping further misery on savers.

Bank Governor Mark Carney has already said the decision on whether to raise rates will come into "sharper relief" around the turn of the year, although financial markets are not pencilling in an increase until the end of 2016 or beginning of 2017.

Today's so-called "super Thursday" for economic releases from the Bank will be scoured for further clues on its outlook for rates.

Economists believe that while the Bank may cut its short-term inflation forecasts, after the consumer prices index slipped back into negative territory in September, its report may show it overshooting the 2% target within two years.

This would confirm that rates are likely to need to rise before markets believe.

The Bank is also set to edge down its UK growth outlook, following official data last week showing that growth eased back to 0.5% in the third quarter from 0.7% in the previous three months.

Kallum Pickering, senior UK economist at Berenberg, said last week's growth data "showed the UK is not immune to risks from abroad" following the China slowdown, emerging market rout and financial volatility over the past three months.

This week's economic surveys suggested the UK economy held up better in October, pointing to growth edging back up to 0.6% in the fourth quarter, or even 0.7% if retailers enjoy a bumper Christmas, according to IHS Global economist Howard Archer.

Economic forecasters at the National Institute of Economic and Social Research (NIESR) believe the third quarter softening in UK growth was "temporary" and predicts a rebound in the final three months of 2016.

NIESR said rates may rise as early as February, but admitted there was an "increased probability" of a move in the second quarter.

BOE's Big Day: What Will Mark Carney Do?