Research Briefing | May 12, 2022

MPC’s mixed messages risk tightening financial conditions

UK MPC’s mixed messages risk tightening financial conditions

Amid headwinds to the UK economy from high inflation and geopolitical uncertainty, loose financial conditions offer a bright spot. That said, financial conditions have become less supportive recently, a trend which could worsen as a result of mixed messages from the MPC.

What you will learn:

  • The commodity-heavy FTSE has enjoyed an unusual period of outperformance recently in comparison with global equity indices, unsecured credit growth has picked up, and house prices have continued to rise.
  • These moves have helped mitigate the tightening effect of higher interest rates. Key to the outlook, however, will be investors’ expectations of where Bank Rate is headed. On that front, conflicting signals from the MPC risk tightening financial conditions unnecessarily.

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