Bank of England set for 12th straight interest rate hike, but the outlook remains murky

cnbc.com:

LONDON — The Bank of England is expected to hike interest rates for the 12th consecutive meeting on Thursday as inflation continues to run hot, but the summit may be drawing near.

The U.K. economy has held up better than expected so far this year, though GDP flatlined in February as widespread strikes and the cost-of-living squeeze hampered activity, while the labor market continues to look resilient.

Annual headline inflation remained stubbornly above 10% in March, driven by persistently high food and energy bills, while core inflation also remained unchanged, highlighting the risk of entrenchment. The Bank expects it to fall rapidly from the middle of 2023 to reach around 4% by the end of the year, however.

The market almost unanimously expects the Monetary Policy Committee to opt for another 25 basis point hike on Thursday, with a majority of economists expecting a 7-2 split vote to take the Bank Rate from 4.25% to 4.5%. However, projections beyond that begin to diverge.

The U.S. Federal Reserve last week implemented another 25 basis point hike but dropped what the markets interpreted as a tentative hint that its cycle of monetary policy tightening is drawing to a close.

The European Central Bank last week slowed its hiking cycle, opting for a 25 basis point increment that lifted rates to levels not seen since November 2008, but contended that the «inflation outlook continues to be too high for too long.»

The Bank of England faces a trickier tightrope, though, with the U.K. tipped to be the worst-performing major economy over the next two years and inflation considerably higher than peers.

Barclays economists on Friday suggested that the MPC may follow the lead of its transatlantic counterpart and that a «new