CPI inflation is falling, but domestic inflationary pressures are proving persistent as the labour market remains tight and wage growth remains strong. Combined with a more resilient economy than the Bank of England and we had expected, that will leave the Bank concerned that inflation may not fall back to 2.0%. We think the Bank will raise interest rates by 50 basis points from 3.50% to 4.00% at the next meeting on 2nd February, and to a peak of 4.50% in the coming months.
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