The Bank of England could raise rates twice this year

The Bank of England could raise rates twice this year

The Bank of England could raise rates faster than expected with up to two hikes this year on the back of a stronger economy.

Economists believe the Bank could take a hawkish stance on monetary policy at its meeting of the Monetary Policy Committee this Thursday, The Times reports.

This could lead to a rate rise in May followed by a second in November, they said.

Currently, the market is only pricing in one rate rise in the UK this year following the first rate hike in a decade last year, when rates were increased from 0.25% to 0.5%.

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The change in interest rate expectations is being driven by the UK reporting growth of 0.5% during the fourth quarter of 2017, which was stronger than expected following growth of 0.4% in the third quarter.

The EY Item Club said it also expected two hikes this year and increased its UK growth forecast from 1.4% to 1.7% in 2018. The UK economic forecasting group said it felt the UK economy was "over the worst". 

Howard Archer, chief economic adviser to the EY Item Club, said: "The near-term prospects for the UK economy appear brighter with GDP growth in 2018 being helped by the squeeze on consumers easing as the year progresses."

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However over the medium term, the group predicted growth would be 1.7% in 2019 and 1.9% in 2020, which would be weak in the context of the global economy.

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