Research Briefing | Oct 19, 2021

UK | BoE looks to be headed for a policy mistake

UK | BoE looks to be headed for a policy mistake

Repeatedly hawkish comments from BoE Governor Bailey suggest that the MPC is preparing the ground for a rate rise. Consequently, we now forecast a 15bp hike in February and the policy rate to end 2022 at 0.5%.

What you will learn:

  • We think the rise in UK inflation is mainly due to global developments that monetary policy can’t influence.
  • We think tightening monetary policy now would be a mistake, albeit one with only a minor impact.
  • Even allowing for the hawkish rhetoric, we think expectations of a rate hike at the next meeting are too aggressive.

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