Stagflation shock not as big as businesses fear

The net effect of the stream of data released this week will probably lead to some policymakers at the Bank of England worrying more about the upside risks to inflation than the downside risks to activity from the Iran war. But we doubt the rises in prices or weakness in demand will be as big as businesses fear. We still think a prolonged hold of interest rates at 3.75% for all of this year is more likely than a rise to 4.25% as investors anticipate.

We will be hosting an online Drop-In to discuss the outlook for Bank of England, ECB and Fed policy at 3pm on Thursday 30^th April. (Register here.)