Even though we think the pound will continue to weaken against the US dollar, from $1.26 now to around $1.22 by the end of the year, that’s unlikely to significantly boost CPI inflation as we think it will strengthen against the euro. Nonetheless, there is a clear risk that the pound becomes another unhelpful source of inflation. And this week, we revised up our interest rate forecasts. We now expect Bank Rate to rise from 0.75% to a peak of 3.00%.
UK Drop-In (Thurs. 5th May, 15:30 BST): Paul Dales and Ruth Gregory will be discussing our UK Economic Outlook, including our above-consensus call for UK interest rates, in a 20-minute online briefing after the May MPC meeting. Register now
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