Although the new Prime Minister, Liz Truss, has saved some of the blushes at the Bank of England by reducing the probable peak in inflation from at least 14.5% to around 10.5%, the resulting support to economic activity from her freeze to utility bills will just mean that inflation is higher than otherwise further ahead. As such, the Bank will probably have to raise interest rates higher. We expect a 50 basis point (bps) rate hike, from 1.75% to 2.25%, at the policy meeting on Thursday 22nd September (postponed from 15th) and now think rates will peak at 4.00% (up from 3.00% previously).
We are resending a revised version of this BoE Watch to take into account the developments since the original was published on Thursday 8th September.
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