The Bank of England’s Monetary Policy Committee (MPC) has once again voted to maintain the Bank Rate at 0.25%.
However, the committee expects inflation to move towards the Bank’s 2% target quicker than expected.
Nick Dixon, investment director at Aegon, said this meant the only way is up for interest rates in 2017.
“He said: “Base rate hikes will be the tool of choice for the monetary policy committee to keep prices in check. Mortgage holders should consult their advisers now about fixing their rates before they rise.”
Ian Kernohan, economist at Royal London Asset Management, added: “The Bank of England was not expected to change policy at this meeting, and their statement suggests that the balance of arguments favours keeping policy unchanged for the foreseeable future. They note that the forward-looking components of business surveys are weaker than those for current output levels, suggesting a slowdown in 2017. Also, with trade weighted sterling moving higher since their last meeting, this would result in a slightly lower path for inflation than they had envisaged.
“The MPC will remain sensitive to any slowdown in economic activity next year, with real income growth squeezed by rising inflation and Brexit uncertainty impacting corporate investment plans. In my view, the balance of probability still favours another small rate reduction next year, and with the Fed hiking rates, this will continue to put downward pressure on sterling against the dollar.”
