abrdn: Bank of England remains cautious for now

abrdn: Bank of England remains cautious for now

June 16, 2022

Currency British Pound UK
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Below are the comments of Luke Bartholomew, Economist at abrdn, on today's Bank of England meeting.

No surprises from the Bank of England today, after a week where several other major central banks have given markets something of a jolt. The 25bps increase might look relatively small compared to the 75bps increase delivered by the Federal Reserve in the US yesterday.

But while both central banks are dealing a large inflation overshoot, the problems facing the UK economy are different and in some ways more difficult than those in the US. The UK is still some months away from the peak in inflation, which would argue for tighter policy, but there is also evidence that economic activity is slowing sharply and the labour market is cooling, which might argue for a more cautious approach.

The difficulty of navigating this dilemma can be seen in the split vote at the Bank. We expect the more cautious voices to continue to win out in Bank policy making, and the different approach between the US and UK will remain a key driver of markets, especially currency markets.

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