The Bank of England (BoE) will raise interest rates twice this year, according to the EY Item Club, despite market expectations of a hike in May falling in recent weeks.
In its Spring Forecast, the EY-sponsored forecasting group said the Monetary Policy Committee's (MPC) pessimism that inflation will return back below its 2% target meant there would be two 25 basis point increases by the end of the year, taking rates to 1%. This prediction is far more hawkish than current market expectations which fell back following BoE Governor Mark Carney's comments last week that a May rate rise was not a "done deal". Furthermore, inflation fell to a 12-month low of 2.5% in March while the report said the recent weather had led to "far from stellar" economic data....
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