The Bank of England is expected to raise interest rates to their highest level since 2009 on Thursday, as the central bank seeks to strike a balance between tackling record inflation and not taking action that would exacerbate the UK economic slowdown. Increasing rates from 0.75% to 1% would mean the BoE hits a self-imposed threshold to reveal the next steps in its plan to reduce billions of pounds worth of assets built up over 12 years of quantitative easing following the financial crisis.
The Bank of England this week is expected to raise interest rates to their highest level in 13 years and clarify how it plans to sell off some of its 847 billion pounds ($1.1 trillion) in government bond holdings.
The move would take the U.K. central bank into uncharted territory since none of its major-economy peers have yet sold government bonds accumulated under quantitative easing since 2008.
There is a "clear chance" that Britain would enter a recession as rising inflation reduces household spending, according to Ball, stressing that a contraction is not Goldman's central projection. Given the tightness of the UK labour market, the Bank of England is likely to raise interest rates again, according to Goldman Sachs' chief UK economist.
Goldman, Morgan Stanley, ING, HSBC, Credit Suisse, and BNP expect a 25 basis point increase.