Bank of England warns of early interest rate rises

The Bank of England froze today its key interest rate at 0.5 per cent but cautioned that it could rise more quickly than expected to help bring down inflation.
The BoE also ramped up its outlook for the British economy, despite persistent uncertainty surrounding Brexit.
The central bank's nine-strong monetary policy committee "voted unanimously to maintain bank rate at 0.5 per cent", it said in a statement, but warned that borrowing costs could rise sooner than expected "in order to return inflation suitably to target".
"Monetary Policy would need to be tightened somewhat earlier and by a somewhat greater degree over the forecast period than anticipated," it added.

In reaction, the pound surged against the euro and dollar on the prospect of a potential rate hike as soon as May, according to analysts, and further rises thereafter.
Global stock markets have meanwhile tanked this week on fears that the US Federal Reserve would also ramp up interest rates more quickly than expected following bright jobs data.

"Monetary policy for major central banks are slowly but surely moving towards normalisation," NFS Micro analyst Nick Stamenkovic told AFP.
"The Federal Reserve is leading the way followed by the Bank of England and European Central Bank. The Bank of Japan is the odd man out but that may change later this year.

"Investors are recognising that the liquidity support for global equity markets is starting to be removed -- but talk of a bear market is premature."
The BoE added today in its latest quarterly forecasts that British gross domestic product (GDP) was expected to grow by 1.8 per cent this year. That was up from the 1.6 per cent given in November.
The economy was then expected to expand by 1.8 per cent again in 2019, when Britain is due to depart from the European Union. That was upgraded from previous guidance of 1.7 per cent.
"The global economy is growing at its fastest pace in seven years," the BoE noted.

"The expansion is becoming increasingly broad-based and investment driven. Notwithstanding recent volatility in financial markets, global financial conditions remain supportive.
"UK net trade is benefiting from robust global demand and the past depreciation of sterling."
The BoE forecast Britain's annual inflation rate to hit 2.4 per cent this year before slowing to 2.2 per cent next year.
The bank's chief task is to keep inflation close to a target of 2.0 per cent, while the current annual rate stands at 3.1 per cent.