In short
Rubbish Talk rates the Guardian's claim that "City economists" doubt rates will hit 4.75% by next summer a 2/10, because the headline accurately reflects on-record forecasts from ING, Deutsche Bank, Oxford Economics and the Bank's own chief economist, all cited by name with figures.
The Verdict
Base fact, lightly framed. The headline compresses a genuinely multi-source story into one line, but every named economist quoted in the piece, ING's James Smith, Deutsche Bank's Sanjay Raja, Oxford Economics, even the Bank's hawkish Huw Pill, does in fact argue market pricing is too aggressive. The only soft spot is "City economists" standing in for a handful of specific forecasters with differing numbers, but that's a minor compression, not a distortion.
What actually happened
Financial markets are wrong to predict the Bank of England will raise UK interest rates by a full percentage point or more by next summer, City economists believe. According to market-implied interest rate expectations, the Bank is likely to raise interest rates at least four times over the next year, lifting the bank rate from 3.75% today to 4.75% by the end of July, and possibly to 5%, meaning five rises, by December 2027. Multiple named City and bank economists push back against that market pricing as too hawkish.
Key facts
- Current Bank Rate: 3.75%, with UK inflation at 3.5%, versus the Bank's 2% target.
- A Reuters poll found 54 of 63 economists expect a rise to 4% in November.
- Deutsche Bank's Sanjay Raja estimated market pricing implies hikes to 5%, but "we have estimated that there is only really ~50bps [half a percentage point] of hikes pencilled in" once risk premia are stripped out.
- Deutsche Bank's base case is for the Bank of England to take the bank rate to 4.25% by next February and then hold rates there until the end of 2027.
- Capital Economics separately forecast rates rising "by 25 basis points twice more… to 4.25% in February, rather than a series of rate hikes to 4.75% by the end of next year as investors" expect.
- Even Huw Pill, the Bank's hawkish chief economist, has suggested market expectations are running too hot, telling an IMF meeting he doubted four hikes were needed.
What to watch for
The 5 November MPC decision is the next test: if the Bank hikes to 4% as expected, watch whether its guidance leans toward Deutsche Bank/Oxford Economics' "two more hikes then hold" view or validates market pricing toward 4.75%+. Also watch oil prices tied to the Middle East conflict, which the article notes are driving the market's higher-for-longer pricing independent of underlying inflation data.
