Bank of England likely to raise rates by 25 bps every six months, says Nomura Research

The Bank of England (BoE) is expected to raise its benchmark interest rates by around 25 basis points in every six months, the next move being at the time of the May 2018 Inflation Report, according to a forecast by Nomura Research.

Despite policy tightening being “gradual” and “limited” – a mantra that the MPC repeated this month’s commentary – and removal of the statement pointing to the need to raise rates by more than the market expects, the Bank’s forecasts for inflation to remain above target for the duration of the forecast horizon continue to suggest to us that interest rates will move up at a faster rate than the exceptionally slow pace implied by market pricing.

Looking at the November 2 meeting, the BoE hiked interest rates for the first time in a decade, a landmark move after interest rates had slumped to the lowest level on record. Alongside Governor Mark Carney, the majority of policymakers at the central bank voted in favor of raising the repo rate to 0.5 percent.

This decision was widely anticipated by the market participants, with the central bank now reversing the emergency rate cut announced in August last year in the wake of the Brexit vote. In one of the most closely watched interest rate decisions since the financial crisis, the BoE said it projected "very gradual" further increases over the next three years.

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