The Bank of England will keep interest rates unchanged until 2025, according to one of the UK's biggest banks.

HSBC says the UK's elevated wage growth will ensure inflation remains uncomfortably high for the Bank of England's policymakers, who are tasked with returning inflation back to the 2.0% target.

“With wage growth high and an absence of rapid productivity growth, services companies in particular may need to continue to pass on increased costs to consumers,” said Simon Wells, chief European economist at HSBC in London.

He added: “Core inflation remains sticky, partly due to high wage growth, so we expect the BoE to be on hold through 2024.”

The forecast defies current market expectations for rate cuts to begin by as early as mid-2024. HSBC noted that although inflation has fallen, it looks set to remain high and could still be well above that seen in many of Europe’s other large economies, leaving the Bank on hold for the entirety of next year.