Bank of America sees BoE raising rates to 4% by Aug 2023

LONDON (Reuters) – Bank of America revised up its forecast for the peak in Bank of England interest rates to 4% on Tuesday from a previous estimate of 3.25%, saying the central bank would need to tighten policy more to offset fiscal stimulus from Prime Minister Liz Truss.

“By lowering peak inflation we see the government’s energy price cap allowing the BoE to avoid increasing the pace of hikes. But more fiscal stimulus means the BoE will have to hike more overall,” Bank of America said in a note to clients.

Bank of America expects the BoE to raise interest rates by half a percentage point next week and at its following two meetings, and then to make further quarter-point rate rises in 2023, taking rates to 4% by August next year.

(Reporting by David Milliken; Editing by William Schomberg)