HSBC predicted that interest rates would rise from the current 0.5% to 0.75% in March, then 1% in May, and finally 1.25% in August.
Capital Economics predicted things would go one step further and said rates could then hit 2% next year.
“The unemployment rate has fallen to pre-COVID levels, job vacancies are at a record high, and wage growth is rising,” chief UK economist Paul Dales said. “That’s a recipe for more interest rate hikes.”
The Bank of England has already raised rates twice in recent weeks to meet inflation, from 0.1% to 0.25% in December, and to 0.5% this month.
In statistics released today (Feb 16), consumer prices increased at an annual rate of 5.5% in January 2022 – a rise from 5.4% the previous month and significantly ahead of the figure of 0.7% recorded in January last year. Prices last accelerated this quickly in March 1992.
Bank officials believe further rises are likely alongside increases in energy bills and the prices of essential goods.
In a separate report, it said unemployment had fallen back below pre-pandemic levels to 3.9% in December, while pay rose by 6.3% in January.
An estimated 1.3 million job vacancies were recorded, with many firms ramping up pay in order to secure staff.
Earlier this month, Bank Governor Andrew Bailey drew criticism from unions and Downing Street alike when he said workers should rein in pay demands or risk a wage-price spiral that could push inflation out of control and derail the economy, This is Money reported.
