In some ways, given its concerns about the weakening in the real economy, the Bank of England's decision not to follow the Fed and raise rates by more than 25 basis points makes sense. But with more persistent underlying price pressures likely to keep core inflation in the UK above the rate in the US until mid-2023 and growing evidence that firms' price and wage expectations have become dislodged from the 2.0% target, we wouldn’t rule out the Bank raising rates by 50bps at future meetings. Either way, we still think rates will need to rise to 3.00%, rather than to the peak of 2.00% expected by the consensus.
Markets Drop-In (22nd June, 10:00 ET/15:00 BST): Join our Markets team for this special briefing on the outlook for equities, bonds and FX and a discussion about revisions to our forecasts. Register now
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