MPC to respond to robust growth with more rate hikes

Having barely slowed in 2017, contrary to predictions of a substantial negative impact from the Brexit vote, we think that the economy will defy renewed expectations of a slowdown this year. Amid strong global growth and low interest rates, net trade and investment look set to continue to provide support. Meanwhile, inflation is set to drop back while wage growth looks set to accelerate, paving the way for consumer spending growth to stage a recovery. With the labour market very tight, the Monetary Policy Committee will be wary of robust demand. As a result, we expect the Committee to raise the Bank Rate three times to 1.25% by year-end, and to 1.75% by the end of 2019.