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Rate hike in February is more than likely

Inflation in the United Kingdom was surprisingly high in December and this makes the British central bank hot for a rate hike. This is what investment strategist Vincent Juvyns of JPMorgan Asset Management expects.

The actual consumer price index was 5.4 percent year-on-year.

Overall, inflation pressures are likely to decrease in 2022 as some factors related to the reopening disappear, JPMorgan foresees.

“The most important questions are: when and how fast will inflation fall and where will it stabilize? In the UK, inflation is likely to rise further in the near future as the maximum price for utility bills is expected to rise by around 50 per cent in April. Fortunately for consumers, tight labour markets are contributing to strong wage increases.”

While those wage increases will ease the pain in the coming months, they could also fuel a longer period of inflation above the target, Juvyns warns.

“Against this background, we believe the Bank of England will raise interest rates by 25 basis points in February.”

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