Four interest rate hikes loom despite surprise economic growth

The Bank of England is anticipated to raise interest rates up to four times within the next year, according to City figures, following the UK economy's unexpected growth in July. The central bank is expected to be encouraged by today's GDP figures, which showed the UK economy expanding by 0.4 percent in July, contrary to predictions of a stagnant growth.

Andrew Bailey, the governor of the Bank of England, is expected to oversee an interest rate hike in November, though the Monetary Policy Committee (MPC) is anticipated to maintain current rates when it convenes next week. Financial markets are now pricing in four quarter-point hikes by next July, which would increase the Bank rate from 3.75 percent to 4.75 percent in under a year.

This morning's stronger-than-expected growth makes an interest rate hike before Christmas "a bit more likely," stated Susannah Streeter, Wealth Club's chief investment strategist. "The main concern is that higher energy costs will be passed on as higher prices by businesses and consumers, but it's probable that the committee will need more evidence of that before triggering rate hikes."

"Given the turmoil in energy and bond markets, however, there is an expectation that we could see three to even four rate hikes over the next year." The UK's strong economic performance may provide more ammunition to the MPC's hawkish members, such as Huw Pill and Catherine Mann, who are pushing for a rate hike in the fourth quarter. The surprise growth gives the Bank of England's hawks evidence to support their position.