<a href="https://www.thenationalnews.com/tags/interest-rates" target="_blank">Interest rates</a> look set to be pushed higher on Thursday in what analysts believe will be one of the last in a cycle of increases by the <a href="https://www.thenationalnews.com/business/economy/2023/01/09/bank-of-england-warns-of-persistent-inflation-and-higher-interest-rates/" target="_blank">Bank of England</a>. Despite growing pressure on already strained borrowers, <a href="https://www.thenationalnews.com/tags/inflation/" target="_blank">inflation</a> is beginning to edge back down off its highs with economists saying there is a glimmer of hope in the <a href="https://www.thenationalnews.com/tags/economy/" target="_blank">economy's</a> more distant future. The Bank of England's monetary policy committee will raise interest rates to 4 per cent on Thursday, analysts say, a half-point rise from the current rate of 3.5 per cent. It is expected by some experts to be the penultimate base rate rise before rates peak at 4.5 per cent or 4.25 per cent, and then decline. The Bank has been raising rates successively for more than a year. In December 2021, the base rate stood at just 0.1 per cent as policymakers tried to encourage consumer spending after <a href="https://www.thenationalnews.com/tags/covid/" target="_blank">Covid</a> slowed down the economy. But efforts to control inflation and bring it back down to the bank's 2 per cent target has led the authority to tighten monetary policy since. The UK's consumer prices index inflation rate, however, slipped slightly to 10.5 per cent in December, down from 10.7 per cent in November and 11.1 per cent in October, suggesting the measure has now passed its peak. Deutsche Bank said Thursday would probably mark the committee's final "forceful" rise in the tightening cycle with a 0.5 percentage point increase. The need to "go big" is due to factors including wage growth beating expectations, indicating that consumers still have some spending power and that prices are still historically elevated, Deutsche said. Societe Generale Global Economics suggested the same, but said it expected another 0.5 percentage point rise in March before any decrease. "Even though the outlook is less gloomy than expected only three months ago, we still think a recession is likely and the MPC's forecasts should continue to predict one for this year," said SocGen economists. "This, and the mounting evidence of some cooling in the labour market, vacancies and job growth in particular, should lead the committee to contemplate an imminent end to tightening." Investec Economics, on the other hand, anticipated a smaller rate rise that would take it to 3.75 per cent on Thursday, before peaking at 4 per cent in March. "Recent weeks have ushered in a greater sense of economic optimism," said Philip Shaw, chief economist at Investec. "This has been driven partly by the mild European winter, which has helped to avoid a need for energy rationing, contributing to a substantial fall in current spot gas prices as well as gas price futures. "In the UK, we are set for another year where real household disposable incomes are set to fall by about 3 per cent, which will continue to squeeze spending and make a recession virtually unavoidable." AJ Bell analyst Laith Khalaf said that a lot has changed since the last MPC meeting, including the fall in gas prices, which will make the committee "think twice about pushing rates up too much".
