(Sharecast News) - Bank has its work cut out for it in trying to bring inflation to heel while not tipping the economy into recession, argue economists at Berenberg.
Ideally, policymakers would wait a while to see how the economy handles itself but time is a now a luxury that it can no longer afford.
"It now has to pay the price for leaving the taps on for too long last year," Kallum Pickering, senior economist at Berenberg said.
Consumer prices are set to rise an annual clip of near 9.0%, as the UK household energy price cap jumps by 54%, making it very uncomfortable for rate-setters to sit on their hands at their next policy meeting in May.
Nonetheless, precisely due to the recession risk, Pickering was anticipating fewer rate hikes than the market - which was discounting Bank Rate at 2.2% by year-end 2022 - but continued gradual hikes until late 2024.
His forecasts called for two more rate hikes in 2023 and 2024 each and for Bank Rate to end 2024 at 2.25% and to stay at that level throughout 2025.
"The risks to our call are skewed towards a slightly steeper path in the near term."
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