The next Monetary Policy Committee (MPC) meeting to set the base rate is scheduled for this Thursday 23rd March, with experts and markets generally expecting the bank to hold the bank rate at 4%.

Investors started to bet more heavily on a rate hold last Monday after the failure of US lender Silicon Valley Bank (SVB).

Interest rate futures put the chance of no change in bank rate this week at about 40%, up from 25% earlier last Monday and around 10% the week before. Bets on a quarter-percentage point rate hike fell to about 60%.

At its latest meeting on 2nd February, the MPC approved a half-point increase in the base rate to 4% and maintained the pace of quantitative tightening at £80bn a year.

Research by AJ Bell suggests that at the moment, markets think the Bank of England (BoE) will keep the base rate at 4% at its March meeting and then take out one more quarter-point rise to 4.25% before ending this rate-hiking cycle. A first cut back to 4% is the current expectation by year end.

Difference of opinion

However, analysts at Deutsche Bank expect the MPC to increase the base rate to 4.25% this week – but says this will be the final base rate increase in this cycle.

A spokesperson for the bank said: “Our call remains finely balanced, however, particularly with global uncertainty heightened and financial stability risks elevated.

“To be sure, we think that the bar for a pause in March is a lot lower, relative to the Fed or ECB, given the BoE’s more dovish forward guidance in February.”

The Office for Budget Responsibility (OBR) says markets expect bank rate to peak at 4.3% later this year – before falling back to 3%.

Interest rates have been going up in an attempt to curb inflation, which is currently at 10.1%. However, the Chancellor Jeremy Hunt said on Wednesday in his Budget statement that forecasts suggested inflation would fall to 2.9% by the end of the year.