The Bank of England looks on course to raise its main interest rate by half a percentage point to 4%, but economists will be looking keenly for signals that this 10th consecutive rate rise will be one of the BoE's last.
The BoE was the first major central bank to begin tightening after the Covid -19 pandemic, lifting rates from a record-low 0.1% in December 2021. But Britain's inflation rate hit a 41-year high of 11.1% in October, driven in large part by Russia's invasion of Ukraine. At 10.5% in December, inflation is further from its 2% target than equivalents in the United States or the euro zone.
After that, most economists see just one rate rise more - to 4.25% in March - while financial markets price in the tightening cycle ending in the middle of this year at 4.5%. The US Federal Reserve - which also meets next week - is similarly expected to end its tightening cycle soon while the European Central Bank is seen further away from reaching the limit of its rate hikes. Economists expect the BoE to trim its forecast for end-2023 inflation to 3-4% from over 5% in November. Also pushing down on inflation is a weak economic outlook - even if it seems to have avoided a recession in the second half of 2022 - and much of the effect of the BoE's rate rises so far is yet to be felt.
About 2.7 million homeowners with short-term fixed-rate mortgages will pay at least 100 pounds ($124) a month more after they refinance at higher rates this year, the BoE predicts.