The Bank of England will probably leave its benchmark interest rate unchanged this week after a surprise increase last month, a survey of economists shows.
Policy makers led by Governor Mervyn King will keep the rate at 4.75 percent following a quarter-point increase on Aug. 3, according to all 49 economists in a Bloomberg News survey. The bank will announce the decision at noon on Sept. 7 in London and publish minutes of the meeting Sept. 20.
The U.K. economy expanded at the fastest pace in two years in the second quarter, prompting the central bank to raise its estimates for growth and inflation for 2006. Investors are betting on one more rate increase by December to wring out inflation pressures, futures trading suggests.
``The Monetary Policy Committee is likely to hike again in November unless clear signs of weakness emerge,'' said Michael Saunders, chief Western European economist at Citigroup Inc. in London. The yield on the interest-rate futures contract maturing in December was 5.17 percent at 8:57 a.m. in London, up from 5 percent before the Aug. 3 rate increase.
Inflation reached 2.4 percent in July, staying above the central bank's target for a third month, the government said Aug. 18. The Bank of England said the rate may reach 3 percent this year, and lifted its growth prediction to about 2.8 percent.
The minutes to the last rate-setting meeting showed all but one policy maker backed the increase. The majority said they were concerned that there was a risk accelerating inflation ``might dislodge inflation expectations, making it more difficult to bring inflation back to target subsequently.''
U.K. consumers expect inflation to gather pace, according to a survey for Citigroup published by YouGov on Aug. 24. Consumer prices will rise 2.5 percent in the next 12 months, up from 2.1 percent forecast by respondents in July, the survey showed.
A wave of migrants from eastern Europe has swollen the ranks of the unemployed and companies have cut costs to counter a jump in commodity prices, so far preventing an inflationary spiral in wages. David Blanchflower, the only policy maker not to back last month's increase, said labor market slack would contain inflation, the minutes showed.