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This page has been updated with additional analysis since first publication. Easing in services inflation may mean BoE halts rate hikes…after tomorrow Note: We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In on …
20th September 2023
Note: We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm BST on Thursday 21st September. (Register here .) We’ve been surprised by the resilience of the labour market over the past year. More recently, …
15th September 2023
We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm BST on Thursday 21 st September. (Register here .) Final 25bps hike to 5.50% to be followed by rates staying at their peak until late in 2024 Bank may …
14th September 2023
This page has been updated with additional analysis since first publication. Recession may have begun The 0.5% m/m fall in real GDP in July (consensus and CE forecasts both -0.2% m/m) could possibly mean that the mild recession we have been expecting has …
13th September 2023
This page has been updated with additional analysis since first publication. Strong wage growth suggests the Bank will raise rates further The tightness of the labour market continued to ease in July. But the further rise in wage growth will only add to …
12th September 2023
It’s no surprise that the reverberations from the revisions to GDP announced by the Office for National Statistics (ONS) last week continued into this week because the upward revisions were so big. As we noted at the time, we estimate that the level of …
8th September 2023
The recent rise in oil prices to $90 per barrel means CPI inflation is likely to rise from 6.8% in July to 7.1% in August, but it won’t prevent inflation falling to the 2% target by the middle of next year. Even if oil prices climbed to $100 per barrel, …
The UK government’s failure to award any new offshore wind-power contracts in its latest procurement round ultimately stems from bean-counting stinginess and is nothing that a lot of extra government investment won’t fix. But with the days of ever-cheaper …
The relaxing of planning rules governing new onshore wind installations in England marks a shift away from the de facto ban that was put in place in 2015. But raising the bar for objections to land-based turbines won’t put an end to green-related …
6th September 2023
The news that the UK economy may now be 1.5% bigger than its Q4 2019 pre-pandemic size, rather than 0.2% smaller, suggests the economy has been much stronger than we previously thought. But with the UK still likely to be suffering from a labour supply …
1st September 2023
This week the Bank of England’s Chief Economist, Huw Pill, indicated that while the Bank still had to “see the job through” and remain vigilant with “stubbornly high inflation”, he didn’t think interest rates need to rise much further from 5.25% now. But …
We’ve become a bit more confident in our forecast that the Bank of England will raise interest rates from 5.25% now to a peak of 5.50%, rather than much further, as higher interest rates appear to be weighing more heavily on activity. The peak in UK …
31st August 2023
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
Gilt yields and sterling have fallen from their cycle highs over the past month or so, and we think the worsening economic growth outlook in the UK and elsewhere mean that this trend will continue over at least the next couple of quarters. Although …
24th 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 …
23rd 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 …
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
Our forecast that in late 2024 and 2025 the Bank of England will cut interest rates further than investors expect suggests that UK gilt yields will fall and close the current gap with US yields. Admittedly, there’s still a risk that inflation in the UK …
25th 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 …
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 today’s big reaction in markets in the UK to better-than-expected inflation news , we still think investors are overestimating the peak in interest rates there and underestimating how much monetary policy will be eased in 2024 and beyond. Indeed, …
19th July 2023
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 …
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
