Top finance brass bet on Bank of England rate hike

The UK’s top finance brass are becoming increasingly confident the Bank of England will hike interest rates.

Over half of chief financial officers (CFO) think rates will rise to at least 0.5 per cent by this time next year, research by Deloitte has found.

Higher interest rate expectations have strengthened over the last three months, with a quarter of CFOs thinking the Bank would raise rates to 0.5 per cent in the second quarter.

Soaring inflation, driven by supply chains buckling under the weight of global demand roaring back as countries push to get their economies back to pre-pandemic health, is making CFOs more sceptical that the Old Lady will keep monetary policy ultra loose.

Swelling energy costs generated by a global gas crunch, alongside rising shipping prices are elevating firms’ cost bases. CFOs predictions for a rise in operating costs hit the highest proportion on record, while over half of them think inflation will run above 2.5 per cent in a year’s time, above the Bank’s two per cent target.

Strengthening inflation expectations pose a real headache for officials on Threadneedle Street. Businesses tend to raise prices if they expect future margin pressure, which can prompt workers to demand higher pay, prompting a so-called wage/price spiral.

Ian Stewart, chief economist at Deloitte, said: “With growth slowing over the third quarter, CFOs are navigating their businesses through a more uncertain environment.”

Worker shortages plaguing the UK economy will bleed into the next year, nearly three quarters of CFOs think.