The weaker economic outlook triggered by the surge in CPI inflation to a 30-year high of 7.0% in March has yet to put a dent in businesses own expectations for their selling prices. The Bank of England’s Decision Maker Panel survey found that in April businesses thought their sales revenues over the next year would increase by slightly less than they did in March. But despite that, they thought they would be able to raise their selling prices at a faster pace. The Bank of England will probably continue to raise interest rates until weaker economic activity starts to reduce businesses’ expectations for their own selling prices. We think that will happen later than most expect, which explains why we think the Bank will raise interest rates from 1.00% now to 3.00% next year.
Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.
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