ING economist James Smith argues that recent UK GDP strength is likely overstated and expects UK growth to slow as inflation moves towards 4% and real wages fall. He highlights rising energy prices and weaker corporate pricing power as headwinds. ING therefore remains unconvinced that the Bank of England will hike, projecting Bank Rate unchanged at 3.75% throughout 2026.
ING doubts UK rate hike prospects
“All of this is old news anyway, given the crisis we find ourselves in today. Growth is likely to slow regardless into the summer as inflation rises towards 4% beyond July. At a time when private sector wage growth is closer to 3% and, if anything, is biased even lower in the short-term, real wages are set to fall.”
“This is why we’re still not convinced the Bank of England will hike rates this year. It’s a close call, which becomes closer still if the disruption hasn’t materially improved by the time of the June meeting. But for now, we’re looking for rates to stay unchanged at 3.75% throughout 2026.”
“Higher energy prices are also likely to add to recent increases in unemployment, at a time when corporate pricing power is depressed.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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