ASI: UK interest rate hike imminent

ASI: UK interest rate hike imminent

23 september 2021

Rente Verenigd Koninkrijk
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Below are comments from Luke Bartholomew, Economist at Aberdeen Standard Investments, on today's Bank of England meeting.

The most striking message in the Bank’s statement today was that it believes the case for tightening monetary policy has strengthened since August. This is despite the fact that the Bank also downgraded its growth forecasts. It therefore seems clear that it is becoming more concerned about the inflation outlook, even if most of the forces currently buffeting the economy and pushing prices higher are likely to be temporary.

The looming end of furlough is a major source of uncertainty facing the economy, but for now the Bank appears relatively confident that the economy can deal with this shock without a large increase in unemployment. As such, investors should prepare for the prospect of interest rates increasing next year, making the UK standout somewhat compared to other major economies where rates are likely to remain unchanged through next year.

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