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Farewell furlough

The impact on the labour market of the end of the furlough scheme could ultimately determine whether an interest rate hike comes in the next few months, or not until mid-2022. Our view remains that its expiry will help to ease the existing shortages and rates won’t rise until May 2022. But if this is not the case, we wouldn’t be too surprised if the Bank of England moved earlier, perhaps as soon as November.
Ruth Gregory Senior UK Economist
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UK Data Response

S&P Global/CIPS Flash PMIs (May)

The flash PMI survey for May suggests that economic growth has slowed to a crawl and that the risk of a recession has not gone away. Even so, weakness in the economy doesn’t seem to be filtering into an easing of price pressures. As a result, we think that interest rates still have much further to rise, from 1.00% now to 3.00% in 2023. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

24 May 2022

UK Data Response

Public Finances (Apr.)

The economic wind that has recently been blowing the public finances to undershoot forecasts adds more pressure on the Chancellor to launch in the coming weeks a big package of measures to help households cope with the cost of living crisis. But as the economic wind is already showing signs of becoming less favourable for the public finances, we think the support package is more likely to be small and targeted. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

24 May 2022

UK Economics Weekly

Inflation to rise further and linger longer than in the US and EZ

Not only did the surge in CPI inflation to 9.0% in April leave inflation in the UK above the rates in both the US and the euro-zone, but inflation in the UK will probably rise further and stay higher for longer. That feeds into our forecast that the Bank of England will have to raise rates further than it expects, from 1.00% now to 3.00%. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

20 May 2022

More from Ruth Gregory

UK Data Response

GDP (Q2 Final)

Today’s release suggests the economy is closer to its pre-pandemic level than we had previously thought and raises the risk that the Bank of England hikes interest rates sooner than our forecast of May 2022.

30 September 2021

UK Economics Update

MPC getting closer to tightening policy

While rates were left at +0.10% in an 9-0 vote and the Bank of England’s target stock of purchased assets at £895bn, today’s Monetary Policy Committee (MPC) policy statement suggests that the Bank is moving closer to raising interest rates. As such, we now think that rates could rise in early 2022, rather than in 2023 as we had previously thought.

23 September 2021

CE Spotlight

Will higher inflation force central banks to raise rates?

We think a sustained period of inflation in the region of 3-4% over the coming years could be dealt with relatively easily by central banks. But if inflation were to rise much further than this, policymakers would have to raise rates more aggressively and for longer. The subsequent economic damage wouldn’t be as large as that seen in the 1980s or the Global Financial Crisis, but a global recession and the bursting of housing bubbles in some advanced economies would be difficult to avoid.

23 September 2021
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