28 March 2023 - Inflation expected to be under control by Autumn

At last week’s meeting of the Bank of England’s Monetary Policy Committee, there was a significant shift in the Bank’s view of inflation. While they still hiked interest rates, for the eleventh consecutive time, to 4.25%, the highest they have been in fourteen years, there was a lowering of expectations for inflation that will be reflected in its Quarterly Economic review that will be published later today. While in the recent past the bank has hoped that inflation will be falling by Autumn, members of the MPC now believe that it will have fallen to close to its target of 2% by the end of the third quarter. Interest rates are expected to peak at 4.50% with a hike at the next meeting due to be held on May 11th expected to be the last in the current cycle. It remains to be seen whether Andrew Bailey will announce this as a policy change, or whether he will remain cautious by continuing to say that the committee is driven by the data. Committee members have for several meetings expressed their individual reasons for why they voted as they have. The most definitive views have been provided by the independent members. There was a danger that Catherine Mann, Silvana Tenreyro, and Swati Dhingra were going to use the MPC as an exercise in economic theory, since the fourth independent member, Jonathan Haskell tends to be seen as in step with the Bank of England’s in-house views. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.