United Kingdom | A February rate hike is on a knife-edge

Whether or not the MPC raises Bank Rate in February is close to a 50:50 call. We marginally favour a hike because Omicron’s economic damage appears modest, the jobs market has tightened and the MPC is likely to significantly revise up its inflation forecast.

What you will learn:

But signs of secular risks to inflation, particularly a wage-price spiral, are still missing.
And with pay growth having slowed, there’s good reason to think the inflation narrative will shift to a less disturbing direction in H2 2022.
With monetary policy operating over a multi-year horizon, we don’t see a pressing need for the MPC to hike in February.

Topics: United Kingdom, Europe, Workforce, Economic outlook, Inflation, Labour markets, GDP, Pandemic, MPC, Covid19, Outlook, Omicron, Bank rate, England