MPC to keep the printing press fired up all year

The Bank of England has much more work to do. It will probably start by announcing £100bn more quantitative easing at the meeting on Thursday 18th June, and we expect additional expansions in QE over the next year. In the end, the Bank will probably end up loosening policy by much more than the market currently expects.
Thomas Pugh UK Economist
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UK Data Response

Public Finances (Dec.)

Stronger tax revenues were just enough to offset big rises in debt interest costs in December. But we don’t expect this to last: further rises in inflation will mean borrowing soon overshoots the OBR’s forecast. Even so, our forecasts suggest the Chancellor still has enough fiscal space to cancel April’s rise in NIC taxes. Drop-In (14:00 GMT, 26th Jan): UK Outlook -- More inflation, more interest rate hikes. Join our UK Economics team for a briefing on the 2022 outlook, including why we’re below consensus on growth but think the BoE will raise rates more than most expect. Register here.

25 January 2022

UK Data Response

IHS Markit/CIPS Flash PMIs (Jan.)

The third consecutive decline in the composite PMI indicates that the Omicron variant weighed further on activity in January. But the recent fall in COVID-19 cases, relaxation of restrictions and signs of easing supply shortages suggest the economy will recover quickly. And, given signs of accelerating price pressures, we still expect the Bank of England to hike interest rates a week on Thursday. Drop-In (14:00 GMT, 26th Jan): UK Outlook -- More inflation, more interest rate hikes. Join our UK Economics team for a briefing on the 2022 outlook, including why we’re below consensus on growth but think the BoE will raise rates more than most expect. Register here.  

24 January 2022

UK Economics Weekly

Economy less favourable for whoever’s in Number 10

Although it is hard to predict whether by the end of next week Boris Johnson’s reign as Prime Minister will be solidifying or crumbling, we know that whoever is in Number 10 over the next year will have to deal with the cost of living crisis. Our forecast that inflation will rise to a little above 7% explains why we think GDP growth this year will fall short of the consensus forecast and why we think interest rates will be raised further than most expect, from 0.25% now to 1.25% by the end of the year. Drop-In (14:00 GMT, 26th Jan): UK Outlook -- More inflation, more interest rate hikes. Join our UK Economics team for a briefing on the 2022 outlook, including why we’re below consensus on growth but think the BoE will raise rates more than most expect. Register here.

21 January 2022

More from Thomas Pugh

UK Data Response

Labour Market (Apr./May)

Another strong set of labour market figures released this morning will feed concerns about labour shortages and the possible impact on inflation of higher wage growth. But the level of employment is still well below its pre-crisis level and underlying wage growth is much weaker than the headline number, suggesting there is still plenty of slack in the labour market.

15 June 2021

UK Data Response

GDP & International Trade (Apr.)

The jump in GDP in April was another sign that consumers are raring to spend as the economy reopens. And all the early indicators suggest that GDP growth was strong in May as well. As such, our forecast of the economy regaining its pre-pandemic level by the autumn is on track.

11 June 2021

UK Data Response

Money & Credit (Apr.)

April’s money and credit data suggests that consumers were still wary about taking on any additional debt. But even if consumers’ willingness to borrow remains limited, they have enough firepower to finance a spending spree through rising incomes and by saving a smaller share of their income.

2 June 2021
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