Borrowers warned of imminent rise in United Kingdom interest rates

An English ten Pound note is seen in an illustration

"We are left with the impression than the BoE wants to squeeze in a hike before the summer, come what may", the economists said in a note to clients. "The unexpected nature of this propelled GBP/USD to a high of 1.4015, as traders and speculators position themselves for a potential interest rate rise, possibly as soon as May".

"We expect the MPC to lift interest rates from 0.50% to 0.75% in May, followed by a further increase to 1.0% in November".

But for savers a move higher by the Bank of England could be a bonus, as High Street banks generally have to raise their rates of interest. They also voted to maintain the bond purchases at 435 billion pounds.

Following the publication of the bank's quarterly Inflation Report alongside its rate decision, Governor Mark Carney hinted that a quarter-point hike in United Kingdom interest rates is now possible as soon as May.

That means that forecasts are liable to change in light of what Carney has called the "twists and turns" of the Brexit process.

But it will fuel criticisms that long-term economic forecasts are inaccurate and can not be trusted - just as the Government has been forced to publish reports about the possible economic impact of Brexit.

In recent weeks, the minority Conservative government has become increasingly split over how to handle Brexit.

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In individual stock news, shares in Compass Group have jumped after the blue-chip group said in a trading update that its organic revenue for the three months to December 31 had grown by 5.9 percent, and that the outlook for 2018 was positive. Meanwhile, the views of the opposition Labour Party are also unclear.

The reports, which have been shown to MPs after they were leaked to the press, claim that under all models Britain's economy will take a hit by leaving the EU. If Prime Minister Theresa May fails to secure a transition deal in the next few months, the governor will have to backtrack. Many firms have held back investment amid the uncertainty and some, particularly in the financial sector, have warned they could relocate some activities into the European Union if there is no clarity soon.

Markets are now pricing a ~70% chance of a May interest rate rise having priced a ~50% chance heading into the BoE event.

This gloomy outlook over price growth has therefore suggested that the RBA does not feel conditions in the economy will warrant a tightening of borrowing costs for some time yet, with the next rate hike potentially not arriving until 2019, assuming the current economic uptrend does not accelerate above forecasts.

At the time it forecast two further increases over three years.

Annual wage growth is expected to pick up to 3 percent by the end of 2018, in line with previous forecasts, but the BoE has often been too optimistic about wages.

Paul Hollingsworth, senior United Kingdom economist at Capital Economics said: "Today's releases pave the way for an interest rate hike in May, and we think that the MPC will hike a further two times this year, taking Bank Rate to 1.25%". Fears about the Fed raising rates faster than anticipated were one of the causes of Monday's savage drop on Wall Street.

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