The UK (not Japan) likely to tighten policy in August

In our view, speculation that the Bank of Japan is preparing to dial back its ultra-loose monetary policy is misplaced. Meanwhile, the ECB is likely to leave its policy rates at rock-bottom levels until September 2019, if not later. In contrast, with the US economy booming the Fed will probably raise rates two more times this year and the Bank of England is likely to hike interest rates again next week. Policy divergence therefore has further to run.

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