City traders are searching for any signs the Bank of England could move faster in hiking interest rates in the coming months with policymakers widely expected to tighten monetary policy on Thursday . 

The Bank’s Monetary Policy Committee is set to lift interest rates from 3.75 per cent to four per cent in a bid to quell rising price pressures in the UK economy. 

But City analysts said the fine-print around the Bank’s decision will be crucial in signalling the pace and scale of further potential interest rate hikes in the coming months. 

BNP Paribas analysts said “communication” was set to be the focus of the Monetary Policy Committee’s crunch decision, with investors and analysts set to pore over members’ explanations for their votes and the official guidance set out by the Bank. 

The French bank said in a note to clients that its forecasts would “have to be overhauled” given the Bank of England’s current stance that it ‘stands ready to act’ on inflation “will no longer be fit for purpose”. 

The note added that the MPC might prefer to emphasise “optionality” around future interest rate hikes although the “most likely path ahead is not a prolonged or aggressive cycle”. 

ING’s James Smith said he expected the Bank of England to be as “non-committal as possible”. He suggested the Bank would find a “clever way of saying ‘we could hike again, but it’s not inevitable’.”

“If there’s going to be a hawkish surprise, it would be if the Bank says something like ‘some further tightening in monetary policy is likely to be appropriate over the coming months’,” Smith said.

Pill ‘sceptical’ of multiple interest rate hikes

The Bank’s MPC faces a crunch decision amid mixed economic data around a weakened jobs market, rising energy prices, volatile financial markets and improved growth in the UK. 

Short-term gilt yields, which impact government borrowing costs, suggest investors are pricing in close to five interest rate hikes over the next two years, even as Bank chief economist Huw Pill warned that he was “sceptical” of market pricing. 

Pill is seen as a hawk on the MPC who has consistently called for interest rates to be higher due to the Bank’s failure to hit its inflation target for most of the last five years. 

The government sets a target for the Bank of England to maintain inflation at two per cent over a horizon of about two years. Governor Andrew Bailey has to write to Chancellor John Healey to explain why inflation has risen above target by more than one percentage point. 

The latest set of data shows that consumer price growth hit 3.5 per cent in the year to September. The Bank’s latest official forecasts predict that inflation could rise above four per cent in the early parts of 2027, although it is poised to revise figures in a more extensive report on Thursday. 

Goldman Sachs said it expected “a notably higher near-term inflation peak” in the Bank’s forecasts. However, it said it expected higher rates to contribute towards a “larger undershoot” in price growth over the following months. 

The Wall Street giant is among a growing number of major firms which believe the Bank will raise interest rates further to 4.25 per cent in February. 

The widely-anticipated paragraphs

Financial firms are also divided on how many MPC members will vote for interest rates to be hiked as a majority vote determines whether monetary policy is changed. ’s Shadow MPC voted 6-3 in favour of calling for the Bank to lift interest rates in order to prevent inflationary pressures from becoming embedded in the UK economy. 

While Deutsche Bank anticipated a 6-3 balance in the Bank in favour of raising interest rates, Berenberg analysts said there would be an 8-1 vote. Splits between so-called doves and hawks on the committee raises intense debates among traders as they attempt to gauge the degree of biases at the Bank of England. 

Bailey’s vote swung the decision in last year’s December meeting when the Bank opted to cut rates to 3.75 per cent. Should the Bank follow through in tightening monetary policy at noon, it would be the first time since August 2023.