Burton Mills economists say that the Bank of England likely remains on track to raise interest rates in May, an event which would lift rates higher than their emergency levels for the first time since the financial crisis ten years ago.

In February, Mark Carney, governor of the Bank of England, shocked markets when he announced that interest rates may need to be increased sooner and by more than was initially anticipated. Carney cited a robust global economic recovery and high inflation as the reason for the sooner-than-expected increase.

Burton Mills economists did not expect the BoE to follow up on its November rate hike with another in March but do anticipate that borrowing costs will be hiked from their current rate of 0.5 percent in May.

An obstacle was overcome this week when Prime Minister Theresa May secured a transition agreement with the European Union to maintain the same trade relations between the UK and the EU for 21 months after Brexit which is just a year away.

Carney has stated that interest rate policy will depend on the progress of Brexit negotiations going forward and whether or not they have a negative impact on confidence.

Burton Mills’ economists say that data indicating a recovery in salary growth is another indication that the BoE will likely increase interest rates in May.

Burton Mills’ economists stated that some members of the Monetary Policy Committee may be in favor of a rate hike as soon as this month but that the other members are expected to hold fire until May when Britain’s economic outlook is revised.

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