If the UK's supply problems are not eased and inflationary pressures are not alleviated by the end of the government's employment support measures, the Bank of England is likely to raise interest rates this year.

This is the view of JPMorgan economist Allan Monks. In a report to clients, he said that while the MPC wanted to postpone the rate hike until 2022 to avoid creating the impression of panic, "the epidemic and the possible long-term impact on labour supply from Brexit" may force it to act earlier.

In the minutes of the September meeting, the Bank of England left room to raise interest rates as early as November, saying that any future policy tightening should start with an increase in interest rates. even if "appropriate" monetary tightening occurs before the end of its bond-buying programme around the end of the year.

Given that clear data on the impact of the end of the compulsory leave scheme on unemployment will not be available until December, economists are fretting about what the Bank of England's monetary policy committee considers necessary to raise interest rates. Monks said news about wages, the pace of labor market tightening and inflation expectations will have a significant impact.

Monks said that if the end of the government's wage subsidy program on Sept. 30 does not ease the pressure on the labor market, then tightening policy in the fourth quarter of 2021 will be more likely than the bank's basic expectations. JPMorgan Chase & Co's basic expectation is that the Bank of England will raise interest rates by 15 basis points in the first quarter of 2022 and then by 25 basis points in the third quarter.

As inflation risks rise and market prices suggest the Bank of England will raise interest rates three times next year, investors are betting that policymakers will focus more on rising inflation than on uncertainty about the economic recovery.