The National Institute of Economic and Social Research said on Wednesday the
Bank of England would need to raise its policy rate to roughly 5% to
successfully curb inflation within three years. Last week the BoE raised its
rate from 3.75% to 4%—its first hike in over three years—and signaled a
possible further rise while opposing market pricing of a 5% terminal rate. NIESR
said pricing investors larger hikes were justified and policymakers may be
moving too slowly. It forecasts inflation will peak at 4.4% YoY in February; if
the BoE raises to 4.25% then holds, inflation would not return to the 2% target
until 2030.
