'Risky' fourth straight rate hike expected from Bank of England as inflation soars

cnbc.com:

LONDON — The Bank of England is expected to opt for a fourth consecutive interest rate hike on Thursday, but economists fear it is entering increasingly choppy waters.

Annual U.K. inflation hit a 30-year high of 7% in March as food and energy prices continued to soar. Meanwhile, consumer confidence has plunged amid fears of slowing economic growth following Russia's unprovoked invasion of Ukraine.

The Bank imposed its third hike in a row at its March meeting, taking the bank rate to 0.75%, and the market expects a 25 basis point increase to 1% when the Monetary Policy Committee meets on Thursday.

Like many central banks around the world, the Bank faces a tough task in reining in inflation without stomping out growth.

Governor Andrew Bailey recently noted that the Bank is walking a «narrow path» between growth and inflation, and implied that the Bank may look to take a more incremental approach to tightening, rather than following the U.S. Federal Reserve with a 50 basis point hike.

The MPC in February forecast inflation to reach a peak of 7.25% in April, but economists now expect it to exceed this and remain higher for longer in light of Russia's invasion of Ukraine and subsequent spike in commodity prices.

Given the nature of the inflationary pressure, Berenberg Senior Economist Kallum Pickering said in a note entitled «BOE preview: A risky hike» on Tuesday that the Bank's widely anticipated hike is «not without risk.»

«On a policy relevant horizon – of say two years from now – the Putin shock will probably depress demand growth, which may also affect inflation dynamics over time. If we are unlucky, the U.K. is already in the early stage of a recession,» Pickering said.

«Amid unusual uncertainty, policymakers – who