Signs that business confidence has started to ease may provide the Monetary Policy Committee with some reassurance that firms' pricing power will soon soften. But the danger that bigger increases in wages will further add to businesses' costs, forcing them to raise their prices by even more, suggests that the Bank may need stronger proof that pricing power is waning before ruling out the need for more aggressive rate rises. We expect interest rates to rise from 1.25% to 3.00%. And for as long as evidence of increased pricing power exists, the risk of even higher rates will linger.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services