United Kingdom: A February rate hike is on a knife-edge
Whether or not the MPC raises Bank Rate in February is close to a 50:50 call. We marginally favour a hike because Omicron’s economic damage appears modest, the jobs market has tightened and the MPC is likely to significantly revise up its inflation forecast.
What you will learn:
- But signs of secular risks to inflation, particularly a wage-price spiral, are still missing.
- And with pay growth having slowed, there’s good reason to think the inflation narrative will shift to a less disturbing direction in H2 2022.
- With monetary policy operating over a multi-year horizon, we don’t see a pressing need for the MPC to hike in February.
Big shifts are underway in Russia-China trade
Data for Q3 on the volume of China's imports of crude from Russia show a drop against the June level. Rather than an indication that China's demand has peaked, this may be a sign that China is preparing for the Russian oil price cap recently agreed by G7 by shifting some of its purchases to the grey market.Find Out More
Levelling up is unlikely under the Liz Truss government
The government's levelling up ambition has probably been made more, not less, difficult by the new "Plan for Growth". Policies of lower taxes, less regulation, and a smaller state are unlikely to have much beneficial impact on long-term growth at the national level, let alone in those regions with long track records of underperformance.Find Out More