**As seen in Risk In The Week report 01/26/24, subscribe at cablefxm.co.uk/reports
Back in December, the Bank of England held the Bank Rate unchanged at 5.25%, this was in line with economists' estimates. The last time we saw the MPC adjust the policy rate was in August. December MPC vote was not unanimous, 3 out of 9 voted for a Bank Rate increase. Looking ahead, the central bank projects growth to be flat this year while it sees inflation slowing to 3.25%, the 2025 forecast sees prices back at 2.0%. Unemployment is expected to rise marginally to 4.75% in 2024. More recently, there has been an upside surprise in U.K. consumer prices, the headline rate rose faster than the prior at 4.0% Y/y and the core metric stayed unchanged at 5.1% Y/y. Despite high inflation and a restrictive policy rate, the U.K. economy has managed to stay afloat, the surprise October contraction was followed by a rebound in November, and we're set to receive December GDP and Q4 data by mid-February.
Analysts at MUFG do not expect the BoE to shift its stance into monetary policy easing anytime soon and noted that the recent inflation data is disappointing for the central bank. However, MUFG hinted at Q4 headline CPI rising at an annual rate of 4.2% and missing the central bank's projection of 4.6%. Prices remain elevated but below the BoE's forecast, this could support the reasoning for rate reductions if the downward trend persists.
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