The Bank of England hiked rates, but the European Central Bank left rates unchanged today. Both moves were expected, and analysts say more rate hikes appear to be in the cards.

The Bank of England’s Monetary Policy Committee voted to raise the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.5%.

“Output growth has remained firm. Business investment has been stronger than expected and, although indicators of consumer spending have been volatile, the underlying picture is one of steady growth. Credit and broad money continue to grow rapidly. The pace of expansion of the international economy remains robust,” the MPC said.

Also, it noted that CPI inflation picked up to 3.1% in March, and the margin of spare capacity in firms appears limited. “Relative to the 2% target, the risks to the outlook for inflation in the medium term consequently remain tilted to the upside.”

“Against that background, the Committee judged that a further increase in Bank Rate of 0.25 percentage points to 5.5% was necessary to meet the 2% target for CPI inflation in the medium term,” the Bank explained.

CIBC World Markets said that the hike was expected, saying, “The MPC had little choice but raising rates today and the most interesting question now is guessing how much more tightening is in the pipeline, if any at all.” CIBC says it favours a wait and see policy approach, but concedes it is far from guaranteed. “In fact, by underlining upside inflation risks, the Bank half opens the door for another rate hike.”

Meanwhile, at a meeting in Dublin, the Governing Council of the ECB decided that the minimum bid rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 3.75%, 4.75% and 2.75% respectively.

This stance was also expected, although CIBC notes that ECB president Jean-Claude Trichet hinted at a June rate hike by switching from a ‘close monitoring’ monetary policy language to a ‘strongly vigilant’ message.

Indeed, it said that the ECB’s press conference confirmed that a June rate hike is “in the bag”, but noted that Trichet did not give away much as to what will happen after June. “Saying nothing about the post June period does not mean that we will not see further rate rises from the ECB,” CIBC said.