City analysts anticipate that the Bank of England will raise interest rates by half a percentage point for the second time in a row at its upcoming meeting, following data indicating a surge in UK wages.
Deutsche Bank specialists predict a likely increase of another 50 basis points from 5% to 5.5% at the Monetary Policy Committee’s (MPC) next meeting on August 3rd.
This expectation is based on recent data from the Office for National Statistics, which revealed a record 7.3% wage growth in the three months leading up to May.
Sanjay Raja, a senior economist at Deutsche Bank, stated that these figures would intensify the MPC’s concerns about ongoing wage pressures. He also noted that the current rates are still significantly distant from those that align with the Bank’s medium-term mandate of reducing inflation to 2%. As of May, the consumer prices index was at 8.7%.
Raja further mentioned that Deutsche Bank foresees interest rates reaching a peak of 5.75%, with an additional 25 basis point rate increase expected in September.
This projection is considerably lower than the 6.5% peak that financial markets are predicting for next year, a forecast that has pushed the average two-year fixed-rate mortgage deal to 6.66% today, marking a 15-year high.
