Repeatedly hawkish comments from BoE Governor Bailey suggest that the MPC is preparing the ground for a rate rise. Consequently, we now forecast a 15bp hike in February and the policy rate to end 2022 at 0.5%.
What you will learn:
We think the rise in UK inflation is mainly due to global developments that monetary policy can’t influence.
We think tightening monetary policy now would be a mistake, albeit one with only a minor impact.
Even allowing for the hawkish rhetoric, we think expectations of a rate hike at the next meeting are too aggressive.