Last week’s data provided further evidence that the UK economy is currently enjoying a ‘Goldilocks’ recovery. Admittedly, there are concerns that an overheating housing market could bring the bears home and scare Goldilocks away. But we think these concerns are probably overdone.
For one, the MPC may choose to use prudential tools, rather than an interest rate hike, if it wishes to cool the housing market. Second, we expect house price growth to start moderate as the year goes on. Accordingly, the economic recovery looks sustainable.
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