Despite the uncertainty caused by the surge in Omicron cases, the BoE raised interest rates to 0.25% this week. This marks a clear change of tack, moving away from a risk management approach. Concerns about a tight labour market and the need to reinforce inflation-fighting credibility are now at the forefront. Early evidence suggests marked damage to activity in social consumption sectors, as rising case numbers hinder mobility and consumers shy away from contact with others. So far the government has been reluctant to offer financial support to these sectors, but that stance might quickly prove unsustainable.
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