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This page has been updated with additional analysis since first publication. Higher interest rates are weighing more heavily on lending The drag on bank lending from higher interest rates grew further in July, particularly in the housing market. We think …
30th August 2023
This week’s bigger fall in UK rate expectations, bond yields and the exchange rate compared to elsewhere is largely due to the markets deciding that a weaker economy will trim inflation, meaning the Bank of England has less work to do. Market pricing is …
25th August 2023
This page has been updated with additional analysis since first publication. Higher interest rates dragging the economy into recession The fall in the activity PMI to below the boom-bust level of 50.0 in August supports our long-held view that the economy …
23rd August 2023
In an environment in which firms feel able to pass on higher energy costs in their selling prices, the latest leap in wholesale gas prices poses an upside risk to our forecast for core CPI inflation to fall to 2.0% by the start of 2025 and to our forecast …
This page has been updated with additional analysis since first publication. Limited scope for pre-election splurge despite borrowing undershoot July’s public finances figures continued the recent run of better-than-expected news on the fiscal position. …
22nd August 2023
The Bank of England has more work to do The Fed’s work may be done, but as this week’s UK inflation and labour market releases made clear, this doesn’t mean the Bank of England can relax. First came figures released on Tuesday showing that the 3myy rate …
18th August 2023
This page has been updated with additional analysis since first publication. Under the weather The 1.2% m/m fall in retail sales volumes in July probably had more to do with the unusually wet weather than the impact of higher interest rates on consumer …
This page has been updated with additional analysis since first publication. Services inflation still uncomfortably high CPI inflation fell to a 17-month low of 6.8% in July, as the effects of the lower utility price cap kicked in. But with services price …
16th August 2023
This page has been updated with additional analysis since first publication. Accelerating wage growth supports the case for one more rate hike The fall in employment in the three months to June and further rise in the unemployment rate will be welcomed by …
15th August 2023
Surveys show that most people in the UK want action to tackle climate change but many do not have the appetite to pay for it. And given that the fiscal firepower and political will to grease the wheels of the green transition are both in short supply, …
14th August 2023
Where the US leads, the UK often follows. So the evidence of broad-based, rapid disinflation in the US offers some hope for the UK. Indeed, at 7.9%, the UK is still lumbered with a CPI inflation more than twice the US rate (3.2%). At least July’s UK CPI …
11th August 2023
This page has been updated with additional analysis since first publication. Resurgence in activity unlikely to last The 0.5% m/m rise in real GDP in June and 0.2% q/q increase in Q2 (CE, BoE, consensus 0.1% q/q) confirmed that a recession has so far been …
With CPI inflation soon to fall below average earnings growth, the cost of living crisis appears to be coming to an end. But households won’t suddenly stop feeling the pinch. We suspect the level of real household disposable income will remain below where …
7th August 2023
Peak does not mean pivot Whether you took this week’s 25 basis point (bps) rise in interest rates, from 5.00% to 5.25%, and the Bank of England’s accompanying communications as hawkish or dovish largely depends on your prior expectations. We thought it …
4th August 2023
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm BST today. (Register here .) Today’s 25 basis point (bps) rise in interest rates from 5.00% …
3rd August 2023
Closing in on the summit, but BoE suggests rates will stay at the top for a long time Today’s 25bps rise in interest rates, from 5.00% to 5.25% (CE 5.25%, 2/3 of consensus 5.25%, 1/3 of consensus 5.50%), may be followed by another hike in September to our …
One key lesson from the bouts of inflation in the 1970s and 1980s is that core inflation faded only once a loosening in the labour market drove down the job vacancy rate to more normal levels. We estimate that a fall in the job vacancy rate from 3.0% in …
2nd August 2023
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd August . (Register here .) Despite the easing in CPI inflation from 8.7% in …
1st August 2023
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd …
31st July 2023
One consequence of higher interest rates is an increase in the losses that the Bank of England will make via the bonds it bought during its quantitative easing (QE) programme. This week, the Bank published an estimate that it could make a huge £150bn …
28th July 2023
25bps hike and peak in sight Reverting to a 25bps hike rather than 50bps Rate hikes may come to a halt a bit sooner than most analysts and investors expect After a lengthy pause, rates to fall further than investors expect in late 2024 and in 2025 We’ll …
27th July 2023
Analysts are split on whether the BoE will repeat June’s 50bps rate hike at the August meeting or revert to the 25bps hikes now favoured by the Fed and the ECB. And the release of the BoE’s new Monetary Policy Report will provide some clues to just how …
25th July 2023
This page has been updated with additional analysis since first publication. Note: Join our special online briefing after the Fed and ECB’s July decisions, and previewing the BoE’s August meeting, at 10:00 EDT/15:00 BST on Thursday 27 th July . Register …
24th July 2023
Despite the fall in CPI inflation from 8.7% in May to 7.9% in June (see here ), the UK is still lumbered with an inflation rate that is 1.4 percentage points (ppts) higher than in the euro-zone. And at 4.8ppt, the gap between UK and US CPI inflation …
21st July 2023
This page has been updated with additional analysis since first publication. Unexpected borrowing undershoot as receipts rise sharply Note: Join our special online briefing after the Fed and ECB’s July decisions, and previewing the BoE’s August meeting, …
Despite the softer tone of the CPI inflation data for June released earlier today, we have raised our forecast for the peak in Bank Rate. Rather than rise from 5.00% currently to a peak of 5.25%, we now think Bank Rate will peak at 5.50%. That’s a bit …
19th July 2023
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK inflation, growth and policy outlook in 20-minute online briefing at 9am BST today. Register here . Some good news, but we’re still raising our …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. Splitting real GDP growth into the sectors most and least sensitive to …
18th July 2023
Paying particular attention to pay growth Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19th July. Register here to join that 20-minute online briefing. We know that the evolution of wage …
14th July 2023
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. Rising interest rates have led lenders to rein in the supply of credit to …
13th July 2023
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19th July . Register here to join that 20-minute online briefing. To the extent that economic conditions influence general elections, and of …
11th July 2023
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19th July. Register here to join that 20-minute online briefing. …
The UK CPI report for June will provide fresh evidence of whether the economy has a persistent inflation problem – and whether the Bank of England will need to do more in response. Chief UK Economist Paul Dales, Deputy Chief UK Economist Ruth Gregory and …
10th July 2023
Market-implied interest rate expectations have continued to rise this week as investors have concluded that in order to squeeze high inflation out of the system, the Bank of England will have to raise interest rates further, from 5.00% now to a peak of …
7th July 2023
The acceleration in core CPI inflation in May combined with the reacceleration in wage growth in April shows that domestic inflationary pressures are still strengthening and interest rates will need to rise further. Admittedly, higher interest rates were …
6th July 2023
The long NHS waiting lists may be one reason why some people are unable to work and may therefore be contributing to inflation being higher in the UK than in other major economies. As the NHS waiting list is unlikely to shorten soon, we think that …
5th July 2023
It’s been another tough week for the Bank of England. The week began with the Bank’s Chief Economist, Huw Pill, defending its inflation models in a letter to the UK Parliament’s Treasury Committee and ended with Monetary Policy Committee (MPC) member, …
30th June 2023
This page has been updated with additional analysis since first publication. Recession still to come this year as resilience fades The final Q1 2023 GDP data confirms that the economy steered clear of a recession at the start of 2023. But with around 60% …
This page has been updated with additional analysis since first publication. Higher interest rates continue to take a toll on bank lending Higher interest rates continued to weigh on bank lending in May, particularly in the housing market. This effect …
29th June 2023
It’s been an extremely tough week for the Bank of England and its Governor, Andrew Bailey. Wednesday’s CPI release revealed the second shocking surge in core inflation in a row and appeared to confirm our view that the inflation problem is bigger in the …
23rd June 2023
This page has been updated with additional analysis since first publication. Services price inflation still sticky June’s flash activity PMIs won’t do much to ease the Bank of England’s inflation fears, which suggests that yesterday’s interest rate rise …
This page has been updated with additional analysis since first publication. Sales boosted by hot weather, but drag from soaring mortgage rates yet to bite The further rebound in retail sales volumes in May suggests the recent resilience in economic …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday, 19 th July . Register here to join that 20-minute online briefing. The 50 basis point (bps) interest rate rise by the Bank of England today, …
22nd June 2023
50bps and at least another 25bps hike to come The Bank of England’s decision to raise rates by 50bps, from 4.50% to a near 15-year high of 5.00%, is unlikely to be the last hike given the UK’s higher and longer lasting inflation problem. We think the …
Ugly inflation print tips balance to 50bp hike tomorrow In response to May’s inflation data , released earlier today, we now expect the MPC to raise interest rates by 50bps to 5.00% at tomorrow’s meeting. A lot of attention has focussed on the fact that …
21st June 2023
This page has been updated with additional analysis since first publication. Public finances limits the Chancellor’s room for manoeuvre Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision …
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST. …
Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . Overview – As the UK’s recent problem of higher inflation …
19th June 2023
