On the back of the surge in inflation in August and the blistering increases in wholesale gas and electricity prices, investors and some economists have shifted their expectations of the first rate hike into Q1 2022. But a rate rise anytime soon would probably prove counterproductive. Meanwhile, we continue to think that inflation fears will ease in time, as supply shortages wane. However, the big risk is that inflation expectations keep rising and that the MPC judges in 2022 that they are too big to ignore, whatever is happening to the real economy.
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