abrdn: Bank of England lags behind

abrdn: Bank of England lags behind

September 22, 2022

Monetary policy UK
Britse vlag.jpg

Luke Bartholomew, Economist at abrdn, responds to the Bank of England interest rate hike.

Not long ago, a 0.5 percentage point interest rate increase in one meeting would have been seen as a very large and rapid increase in borrowing costs. However, given the much larger rate increases we have seen from a number of central banks across the world, a 50bps increase actually looks rather small today.

The Bank of England, therefore, appears to be something of a laggard compared to international peers, which is likely to keep the pound under selling pressure. Market attention will now move to the fiscal announcement from the government tomorrow, which looks set to deliver a significant easing in fiscal policy. Given the degree of underlying inflation pressure in the economy, this fiscal easing will almost certainly be met by a series of further interest rate hikes from the BoE.

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