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Monetary policy has lost some of its potency

The shift away from floating-rate to fixed-rate mortgages has meant that it was always going to take longer than in past tightening cycles for the rise in interest rates to feed through to the real economy. This is one reason why we think that once Bank Rate has peaked at 4.50%, it will stay there until early 2024. The risk is that it could take even longer for the full effect to be felt, strengthening our conviction in this view.

Central Bank Drop-In (2nd Feb., 11:00 EST/16:00 GMT): Join us for this special 20-minute online session when we’ll be taking your questions and highlighting key takeaways from the first BoE, ECB and Fed policy decisions of the year. Register now.

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