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Bank of England to look through Omicron and hike rates this month

The Bank of England will plough ahead and hike interest rates for the first time three years this month despite concerns the Omicron variant could whack the UK economy, according to City analysts.

Strong booster jab take up and high levels of existing immunity stemming from the successful vaccination programme has put the British economy in a strong position to withstand a fourth wave of coronavirus triggered by the new variant, experts at Goldman Sachs have predicted.

The emergence of the heavily mutated strain of coronavirus last week initially sparked fears over the health of the British economy due to the likelihood of strict restrictions to curb the spread of the disease.

These downbeat assessments cast doubt over whether the Bank would raise interest rates at its next meeting on December 16.

However, under Goldman’s baseline scenario, “the UK economy will hold up relatively well during the fourth wave, given high vaccine take-up and a successful booster programme,” the Wall Street investment banking giant said.

“As a result, we still believe that a 15 basis points BoE hike is more likely than not at the December meeting.”

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Bullish assessments from global health leaders have emerged this week downplaying the severity of the Omicron, potentially pushing members of the Old Lady’s rate setting committee into lifting rates.

The World Health Organisation (WHO) tempered speculation that the existing crop of Covid-19 vaccines could be scuppered by the new variant by signaling there is no evidence the new strain reduces their efficacy.

GlaxoSmithKline also announced today its Covid-19 antiviral treatment is effective against Omicron.

Those upbeat health assessments have been echoed by economists this week, who have stressed the UK economy is in a much better position to function effectively even amid Covid-19 curbs.

A waning impact of the virus on the economy suggests it will be able to stand on its own two feet without ultra-loose monetary policy, paving the way for a rate hike.

Even before the emergence of the variant, the Bank was under intense pressure to hike rates to hose down runaway inflation.

The Old Lady stunned markets last month when it left rates unchanged at a record low 0.1 per cent despite expecting inflation to hit five per cent next spring.

Prices are already 4.2 per cent higher than they were a year ago, the highest rate of increase in nearly a decade, according to the Office for National Statistics.

Goldman also expects the Bank of England to hike again in May next year, taking rates to 0.75 per cent by the end of 2022.


Source: City AM

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UK economy to return to anaemic growth as cost of living crisis spikes Brits

A triple threat of a worsening cost of living crisis, higher interest rates and a pulling of government Covid-19 support will throw the UK economy back into an anaemic state, according to new research published today.

Swelling energy bills and rising costs for basic necessities will cause households on tight budgets to rein in spending, according to predictions made by accountancy firm PwC.

Weaker spending from low income households will clamp down on the UK’s economic recovery from the Covid-19 crisis.

The forecast underlines the impact soaring inflation is having on the economy’s capacity for growth.

The UK economy is heavily reliant on consumer spending to generate output, meaning a reduction in spending from low income households would constrain growth.

Brits living on tight budgets “will feel the pinch from a combination of rising inflation, higher interest rates, and fiscal changes” and a looming 1.25 percentage point national insurance hike, cautioned Hoa Duong, economist at PwC.

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PwC’s experts said richer households would be able to shake off the impact of rising prices due to them having greater bandwidth to absorb a higher cost of living.

A surge in spending “will likely be concentrated on higher income households” as a result, the firm said.

Inflation in the UK has taken off in recent months, triggered by a combination of global supply chains breaking down, soaring wholesale energy costs and rising commodity prices.

The Office for National Statistics estimates prices are 4.2 per cent higher than they were a year ago, the highest rate of inflation in nearly a decade.

Yet, PwC expects the rate to scale even further and hit its highest level in three decades next spring.

“The rise in the energy price cap and the reversal of the VAT cuts for hospitality and tourism create a perfect storm that is set to push headline inflation rates to around five per cent and six per cent,” the firm said.

The downbeat projections will be a cause for concern for the Bank of England, which has a mandate to keep inflation at two per cent.

The Old Lady has come under intense scrutiny for keeping interest rates at a record low 0.1 per cent despite expecting inflation to rise to more than double its target.

Officials on Threadneedle Street will announce their next decision on rates on December 16. Earlier this month, they stunned markets when they left rates unchanged.


Source: City AM

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UK inflation surges, fuels expectations interest rates will rise

UK inflation surged to a 10-year high last month, fuelled by a jump in household energy bills and petrol prices, official data show.

Annual UK consumer prices index inflation surged to 4.2% in October, from 3.1% in September, and is now more than double the target set for the Bank of England by the Treasury.

While a sharp rise in inflation had been expected, with economists in a poll by Reuters having projected an October reading of 3.9%, the jump was even greater than expected and fuelled expectations of a rise in UK base rates from a record low of 0.1% next month.

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Colin Dyer, client director at financial services group abrdn, said: “Rising fuel and energy prices, paired with global supply chain disruptions, caused inflation to soar last month after a temporary respite in September.

“The cost of living has been increasing rapidly for much of 2021 because of the strong economic recovery from the coronavirus pandemic, but October’s inflationary rate is the highest we’ve seen in over a decade. And with the Bank of England now warning of it exceeding 5% early next year, it’s likely to remain an uncertain and uncomfortable period for many.”

He added: “For those trying to save, rumours of a rate rise on the horizon might seem positive, but this is unlikely to be substantial enough to show any real returns.”

By Ian McConnell

Source: Herald Scotland

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City bets on Bank of England rate hike ramp up again after strong jobs figures

City bets on the Bank of England hiking interest rates soon are ramping up once again after fresh jobless data showed the worst effects of the end of the furlough scheme have been largely avoided.

The Old Lady will turn the dial at its next meeting in December due to the labour market looking less fragile, according to economists, experts and analysts.

Thomas Pugh, economist at RSM UK, said today’s jobless figures showed a key “obstacle preventing” the Bank from hiking rates had been “removed”.

“The continued robust recovery in the labour market will reassure those MPC members who were concerned about damage from the ending of the furlough scheme… most MPC members will probably decide that the labour market is now robust enough to withstand an interest rate hike,” he added.

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Officials on Threadneedle Street justified leaving rates unchanged at a record low 0.1 per cent around a fortnight ago due to a lack of visibility over the impact of the end of the furlough scheme on the jobs market.

The Bank is most concerned about wage pressures fuelling medium term inflation expectations, which could trigger even sharper upsurges in price rises if workers demand higher pay and businesses try to pass on swelling costs to consumers.

Data from the Office for National Statistics (ONS) released this morning showed payrolled employees climbed 160,000 over the last month to over 29m in October.

This is the first time the ONS has examined the labour market when the furlough scheme has not been live since the start of the pandemic, indicating the economy may be strong enough to stand on its own two feet and absorb higher borrowing costs.

“Today’s data has made the odds of a rate rise in December more finely balanced,” Martin Beck, senior economic advisor to the EY ITEM Club, predicted.

The Old Lady decided to keep rates dormant despite expecting inflation to hit five per cent in April next year, more than double its target.

Economists expect near term inflation to blow the Bank’s target out of the water, with some thinking it will reach four per cent.

The ONS will verify whether those wagers are accurate when it releases its latest inflation estimates tomorrow.

CPI inflation is already running hot at 3.1 per cent.


Source: City AM

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Interest rates: why they could rise even while the UK economy remains in the recovery position

The pandemic has been a bruising experience for the global economy. In response, many countries have kept interest rates low, to keep money moving at a time of extreme uncertainty. In the UK, rates have been at an all time low of 0.1% since March 2020. But this may be about to change.

Andrew Bailey, the governor of the Bank of England, has hinted at an interest rate rise. This would lead to a rise in the cost of borrowing. More expensive borrowing generally means lower levels of disposable income, followed by lower levels of household spending. The lower demand for goods then lowers prices, which leads to a decrease in inflation.

The Bank of England is signalling that curbing inflation may be necessary, given that the annual rate currently stands at 3.1%. Rising prices, without a match in wage increases, adversely affects incomes, reducing the purchasing power of households (especially the poorest). Given that the Bank of England’s main role is to keep inflation at 2%, you can see why Bailey is considering the rate rise.

Typically, though, the Bank of England cuts interest rates during lean periods to get people spending and stimulate the economy. It has historically tended to increase the rate during economic booms, to “cool down” the economy and prevent inflation getting too high.

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But almost two years after the arrival of COVID-19, even with some elements of normal life resuming, few would describe the current situation, after lockdowns, business closures and furlough, as economically booming.

The reason that an increase in interest rates now seems likely is that the inflation that we are seeing is unlikely to be as a result of economic growth. Among the facts, the Office for National Statistics calculated that in September 2021 the largest contribution to the inflation rate came from rising costs in transport; housing and household services (the cost of renting or buying, furnishing and maintaining a home); restaurants and hotels; and recreation and culture.

The key challenge for the Bank of England is to identify whether these price rises are temporary or not. Particularly important will be the monitoring of rising energy prices, which the bank predicts could push inflation even higher (to 4%) later in the year.

A banking balancing act

The big question is whether the British economy, which is still in a process of recovery, can afford a higher interest rate. For while recent data has pointed to a better than expected jump in GDP growth, the UK economy reportedly remains 3.3% below pre-pandemic levels.

The recovery seems to have stagnated mainly due to supply chain issues (labour and raw materials shortages), with the recent energy crisis creating even more uncertainty. Despite a jump in current unfilled vacancies to a record 1.1 million, the fact that the furlough scheme was only recently phased out suggests that the labour market might still be weak.

The danger is that interest rates could go up too soon, with a depressing effect on economic activity and the housing market – reaching the desired goal of decreasing inflation but at the expense of economic growth. In the words of one former Bank of England committee member, an interest rate hike now would be a “disaster”.

Overall, then, it is not yet clear whether an interest rate rise is in the economy’s best interest right now. However, the Bank of England policy mandate is clear in that it can’t afford to let inflation go out of control.

For now, we will have to wait while the the bank’s monetary policy committee carefully weighs up the options. But although the final policy outcome is the result of a vote, the governor’s remarks unambiguously point to an imminent interest rate rise – very possibly sooner than some economists (and many households) would like.

By Luciano Rispoli

Source: The Conversation

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Bank of England rate-setter: Brace yourself for interest rate rises very soon

One of the key rate-setters on the Bank of England’s Monetary Policy Committee has today said UK households should be primed for an interest rate rise “significantly sooner” than first thought.

Michael Saunders, the former Citigroup economist turned Threadneedle St wonk, noted that financial markets had already priced in a pending rate rise as economies look to dampen inflation.

Saunders told the Sunday Telegraph: “I’m not in favour of using code words or stating our intentions in advance of the meeting too precisely, the decisions get taken at the proper time. But markets have priced in over the last few months an earlier rise in Bank rate than previously and I think that’s appropriate.”.

It’s a fresh sign that the Bank of England may be the first major central bank to raise rates as the world emerges from the Covid-19 pandemic.

Last month the nine-member Monetary Policy Committee voted unanimously to keep rates at the record low of 0.1 per cent.

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But Saunders and Deputy Governor Dave Ramsden voted to halt the BoE’s government bond purchases ahead of schedule.

Saunders said markets had fully priced in a February rate hike by the British central bank and had half priced in a December increase in borrowing costs.

“I’m not trying to give a commentary on exactly which one, but I think it is appropriate that the markets have moved to pricing a significantly earlier path of tightening than they did previously,” he said.

The comments by Saunders came shortly after Bank of England Governor Andrew Bailey said inflation running above the central bank’s two per cent target was concerning and had to be managed to prevent it from becoming permanently embedded.

By Josh Martin

Source: Commercial Finance Network

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Bank of England: Economists Debate the Outlook for Interest Rates

The August monetary policy decision from the Bank of England (BoE) gave companies and households advanced notice that a normalisation of interest rates could be likely over the coming year or so, although as ever there remains a broad plurality of views among analysts and economists on the question of exactly when borrowing costs and savings returns are likely to rise.

This month’s policy decision proved to be a milestone in the UK economy’s journey through the pandemic after the BoE’s announcement revealed that an unknown number of the eight participants in August’s Monetary Policy Committee (MPC) meeting thought the Bank’s minimum economic thresholds for necessitating an interest rate rise had already been met fully during recent months.

“Some members of the Committee judged that, although considerable progress had been made in achieving the conditions of the MPC’s existing policy guidance, the conditions were not yet met fully,” minutes of the MPC’s meeting read.

“The other members of the Committee judged that the conditions of the existing policy guidance had been met fully, as demonstrated by developments in economic data and the latest central projections for spare capacity and CPI inflation in the August Report, but noted that the guidance had made clear that these had only ever been necessary not sufficient conditions for any future tightening in monetary policy,” the minutes later state.

The MPC in the end agreed to leave Bank Rate at 0.10% and to continue as planned with the additional £150BN of government bond purchases announced as a supplement to the £895BN asset purchase target of its quantitative easing programme back in November, but the accompanying guidance made clear that the BoE’s interest rates would likely rise as soon as next year and that they could reach 0.50% before the end of 2023.

Furthermore, and following a months-long discussion, the BoE also set out the preconditions necessary for a steady reversal of its QE programme that would eventually see the £895BN portfolio of government and corporate bonds sold back into the market in a policy step that would also eventually have the effect of lifting borrowing costs and savings returns across the economy.

“The rapid recovery in demand has eroded spare capacity such that the economy is projected to have a margin of excess demand for a period. In the medium term, conditioned on the market path for interest rates, inflation is projected to fall back close to the 2% target, and demand and supply are expected to return broadly to balance,” the BoE’s August Monetary Policy Report says.

Driving the BoE’s decisions was the expectation of a continued strong bounceback by the economy this year and next that is seen encouraging a stubborn return of inflation, which was expected to reach 4% later this year; twice the level of the BoE’s 2% target.

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It’s the inflation target that the BoE is seeking to meet when it makes changes to its policy settings, though inflation is influenced by many factors including overall activity within the economy as well as ‘supply side’ factors like the availability of goods and services.

There’s still plentiful scope for the fortunes of the economy to change over the coming quarters however, as well as ample room for the inflation picture to materialise differently to how it was envisaged in August’s meeting, which is a big part of the reason why analysts and economists still have a plurality of views about the outlook for the BoE’s interest rates and quantitative easing programme.

Some of these views are detailed below.

Shahab Jalinoos, head of FX strategy, Credit Suisse

“Last week’s BoE decision to map out its intentions around the sequencing of rate hikes and QE withdrawal reminded markets that the UK economy likely warrants quicker monetary tightening than most in G10.”

“The idea of persistent rate hikes that emerged again in the US in the past week was not mirrored in the UK…In our view, this conservatism in terms of UK rates pricing is the weak link that could yet be challenged by data in coming months.”

“If employment numbers in the Autumn are robust enough to suggest the end of the job furlough scheme in September will not lead to a jump in unemployment. Or if signs of post-Brexit / pandemic labour shortages deepen further and suggest persistent wage pressure is possible, we can imagine a scenario where by Q4, the market makes a meaningful attempt to re-price higher.”

Valentin Marinov, head of FX strategy, Credit Agricole CIB

“The resilience of the pound contrasts sharply with the underperformance of other European G10 currencies and, in particular, the EUR.”

“One recent reason for the recent decoupling between the GBP and the rest of the European G10 currencies has been the outcome of the BoE August policy meeting.”

“We doubt that the meeting was a hawkish game changer for the GBP, however, with the BoE likely to embark on a very gradual policy rate normalisation rather than a tightening cycle.”

“The BoE still doesn’t see any significant risk of runaway inflation in part because there was a limited scope for overheating of the UK economy beyond 2022. In all, we think that the BoE should remain hesitant to join the camp of the hawkish G10 central banks.”

Philip Shaw, chief UK economist, Investec

“After last week’s news, we have amended our view. We still envisage a Bank rate hike to 0.25% from 0.10% to take place in May 2022. However we now also expect a subsequent increase to 0.50% in Q4 2022. In tandem with the MPC’s guidance, we expect the BoE to cease reinvesting maturing gilts from 2023, facilitating a decline in its stock of assets…We expect outright gilt sales to begin in early-2024 (i.e. once the Bank rate is 1.0%).”

“At the same time, we are pencilling in two further increases in the Bank rate to 1.0% by end-2023.”

“Of course it is impossible to forecast the pace with any degree of confidence at all. However our working assumption is that the BoE will sell £20bn of gilts through the course of 2024 and 2025, in addition to the £130bn (currently) set to mature over those two years, shrinking the balance sheet by a further £150bn, effectively unwinding the additional QE supplied over the course of 2021.”

James Smith, developed markets economist, ING Group

“The Bank of England is no longer forecasting any real increase in UK unemployment later this year, even as wage support comes to an end. We think this may prove optimistic, and instead we think we could see an increase in the jobless rate to around 5.5% – though clearly this is still much lower than predictions made only a few months ago.”

“Taken together with the fact that inflation is likely to be much less exciting after a peak of around 3.5-4% later this year, a rise in unemployment would suggest the Bank of England is unlikely to rush into tightening in 2022. For now we’re pencilling in a rate hike in early 2023.”

Stephen Gallo, European head of FX strategy, BMO Capital Markets

“The current pricing of the sterling OIS curve has the first full 15bps rate hike baked into it by June (Figure 2). Assuming Q3 shapes up to be a strong growth quarter, and there is no harsh reimposition of restrictions during autumn and winter months, we don’t see why that 15bps can’t be pulled forward, especially since the BoE has scope to argue that the return to a 25bps setting is not a ‘tightening move’.”

“Although the BoE believes a significant overshoot of the 2.0% CPI inflation target will be temporary, there is probably at least some acknowledgement within the MPC that the factors which severely held down inflation pressure immediately after the GFC are now working in reverse or gaining in intensity (namely: globalization, capacity constraints, bank lending, fiscal policy, and currency debasement).”

Michael Cahill, G10 FX strategist, Goldman Sachs

“The Bank of England’s updated outlook and exit guidance essentially aligned with the market’s view that the time for liftoff has been pulled forward, but the likely glide path will be relatively shallow.”

“Our economists maintain a much later liftoff (Q3 2023) than current market pricing, because they think there is more slack in the economy, which should translate into softer labor market and inflation data through year-end than expected by the BoE.”

“Given the BoE’s refreshed guidance on exit sequencing, as well as our slightly-revised Bank Rate forecast, we are upgrading our 3m and 6m EUR/GBP forecasts to 0.85 [GBP/EUR: 1.1764]; we expect the currency to be particularly sensitive to incoming data on inflation and the labor market as the furlough scheme expires, with a smaller revision to our 12m forecast to 0.87 [GBP/EUR: 1.1494] (vs aflat 0.88 path previously).”

“In revising their Bank Rate forecast our economists noted that risks are skewed toward earlier hiking, which also implies that risks are for a lower path for EUR/GBP than in our updated projections.”

Paul Dales, chief UK economist, Capital Economics

“We think tightening will start later than the markets expect, perhaps in August 2023. And we will be keeping an eagle eye on the labour market and wage data to see if our assessment is looking good or a bit skew-whiff.”

“The financial markets are fully pricing in a hike in Bank Rate from 0.10% to 0.25% by this time next year. The Bank’s inflation forecasts loosely suggest that might be a bit too soon.”

“In response to the Bank confirming how it will tighten policy, we now think Bank Rate will be raised a bit earlier and QT will start a bit later. Our new forecasts envisage Bank Rate rising from 0.10% to 0.25% in August 2023, to 0.50% in February 2024 and QT beginning in February 2024.”

Andrew Goodwin, chief UK economist, Oxford Economics

“While there was greater clarity on the strategy for future tightening of monetary policy, the potential timing was little clearer. The tone of the minutes was more hawkish, but the shift was subtle, and we think the MPC is still some way from starting active discussions about the need to tighten policy.”

“The £150bn programme of gilt purchases, which was set in train last November, is now very unlikely to be stopped before its planned finish at the end of the year. At the August meeting, only Michael Saunders voted to curtail it sooner. And with only two more opportunities to cut it short, the MPC’s forecasts appeared to set the bar high for a change of heart.”

Kallum Pickering, UK economist, Berenberg

“After ending asset purchases in December, we continue to expect the first-rate hike to come in August 2022 (15bps). Today’s meeting suggests the risk to this call are for a rate hike somewhat sooner than we project. If, as we expect, the BoE hikes the bank rate to 0.5% by end 2022 (following a 25bps hike in December), the newly outlined exit strategy opens the door for the start of a passive balance sheet reduction beginning in 2023.”

“While the voting pattern of the August meeting surprised a little to the dovish side, the overall meeting outcome and guidance is in line with the base case outlined in our preview – that we expect the BoE to begin to normalise its policy by the end of the year.”

Samuel Tombs, chief UK economist, Pantheon Macroeconomics

“We are bringing forward our expectation for the increase in Bank Rate to 0.25% to Q2 2023, from H2 2023 previously. We then expect Bank Rate to rise to 0.50% in Q1 2024 and for the MPC to stop QE reinvestment then too.”

“We think that CPI inflation will return to the 2% target in Q4 2022, four quarters earlier than the BoE expects.”

“In particular, we think that supply chain issues and strong pandemic-related demand for goods will have eased by early next year, causing core goods inflation to undershoot its long-run average.”

“We think that sterling will depreciate against the dollar to $1.35 over the coming months, from $1.38, as it becomes clear the U.S. Fed will raise interest rates sooner and further than the U.K. MPC, and then will remain at this level in 2022, as political risks start to be considered by investors again.”

“We expect a smaller depreciation against the euro to €1.17, given the likelihood that Eurozone interest rates remain stuck at the floor over the next two years.”

Written by James Skinner

Source: Pound Sterling Live

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Inflation doubles as fuel, clothing and ice-cream all soar in price

Inflation doubled in April and could do the same again by the end of the year, some economists warned today, as pressure grows on the Bank of England to raise interest rates.

While that would risk curtailing the economic recovery, some say rates are simply too low at 0.1% and that the Bank is underestimating the chance of inflation spiralling out of control.

Prices rose at 1.5% in April up from 0.7% in March, higher than expected. Gas, electricity and petrol all jumped, as did more frivolous items such as chocolate and ice-cream – there has been talk of a 99 Flake shortage in the summer.

Ernst & Young says inflation will hit 2.7% in late 2021 or early 2022. “Further rises in consumer price inflation are highly likely,” says E&Y.

The Bank is supposed to keep inflation at 2% — it has undershot that target for the duration of the pandemic and for the last 21 months running.

But as the UK emerged from lockdown, pent up demand from consumers saw a spending splurge. By some estimates there is £60 billion of “excess” cash in bank accounts ready to be spent.

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Steven Cameron, pensions director at Aegon, said: “As the door to the economy reopens the expectation is that consumers will rush to spend savings built up over lockdown. There is concern that this creates inflationary pressures that pushes rates well beyond both the target and anything that consumers have had to deal with in recent years or for many in living memory.”

The most bearish economists note that there are price pressures in the pipeline on many vital goods, including energy and timber.

And they say that if you strip out a temporary cut in VAT on hospitality, inflation is actually already at 3.2%.

In the US, where government spending is even higher than in the UK, inflation hit 4.2% in April.

Ed Monk, associate director for Personal Investing at Fidelity International commented: “Inflation has started to take off. More than doubling to 1.5% in April, it is now closing in on the Bank of England’s 2% target and could blow past that if the demand in the economy continues to build in the coming months.”

Simon French at Panmure Gordon said: “These numbers confirm that inflation is going to pick up strongly this year, aided by comparisons with such depressed prices in 2020. However the Chancellor should hold his nerve. Inflation ultimately is a sign the economy is reopening, jobs are being created and livelihoods are being saved. To try and deflate the UK economy now would be a policy mistake.”

Petrol rose by 1.8p a litre to 125.5p. Gas and electricity bills both rose by more than 9%.

Ruth Gregory at Capital Economics said: “The rise in CPI inflation from 0.7% in March to 1.5% was almost entirely driven by energy price effects, which will only be temporary. We doubt a sustained increase in inflation that would concern the Bank of England will happen until late in 2023.”

By Simon English

Source: Evening Standard

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Bank of England predicts 7.25% growth in economy as interest rates held at 0.1%

The UK’s economy could grow by more than 7% in 2021, according to the latest Bank of England forecast – the fastest pace since the Second World War.

Their projection is that the UK gross domestic product (GDP) – a measure of the size of a country’s economy – will rebound by 7.25% and mark the best year of growth since official records began in 1948.
This represents a sharper recovery than the central bank’s previous forecasts, with 5% growth previously expected.
It comes after the pandemic saw the UK suffer the biggest drop in output for 300 years in 2020, when it plummeted by 9.8%.

But the Bank’s quarterly set of forecasts showed it downgraded its growth outlook for 2022, to 5.75% from 7.25%.

The rosier view for the economy this year came as the Bank’s Monetary Policy Committee (MPC) held interest rates at 0.1%.

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The Bank kept its quantitative easing programme on hold at £895 billion, although one member of the MPC voted to reduce it by £50 billion given the brighter recovery prospects.
In minutes of the latest decision, the Bank of England said the lockdown is set to see GDP fall by around 1.5% – far better than the 4.25% drop first feared.

It also sharply cut its forecasts for unemployment over the year.

The Bank said: “GDP is expected to rise sharply in 2021 second quarter, although activity in that quarter is likely to remain on average around 5% below its level in the fourth quarter of 2019.

“GDP is expected to recover strongly to pre-Covid levels over the remainder of this year in the absence of most restrictions on domestic economic activity.”

But it warned over “downside risks to the economic outlook” from a potential resurgence of Covid-19 and the possibility that new variants may be resistant to the vaccine.

Source: iTV

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