Doubting the BoE’s dovish tilt

It may seem odd that we are still forecasting interest rates to rise from 3.00% to 5.00% when the Bank of England said this week that it expects rates to peak between 3.00% and 4.00%. But what happens to inflation is more important than what the Bank says. Indeed, the Bank has persistently underestimated inflation over the past 18 months and, as a result, has had to raise interest rates further than it expected. We think this will happen again, although the risks to our 5.00% rate forecast are tilted to the downside.