abrdn: BoE's rate hike important milestone on the way to recession

abrdn: BoE's rate hike important milestone on the way to recession

June 22, 2023

Interest Rates Monetary policy UK Recession (threat)
Outlook vooruitzicht (21) recessie crisis

Luke Bartholomew, Senior Economist at abrdn, comments on today's Bank of England meeting.

'While some investors had been speculating about the risk of a 50bps increase today, this decision will come as a shock for many in the market.

The risk for the Bank of England in causing such as surprise, is that they end up looking panicked, and thus, increase the uncertainty of the likely future path of interest rates. However, policy makers clearly feel that that the recent run of inflation data has been ugly enough to warrant such a large move to try to keep a lid on inflation expectations.

It is increasingly difficult to see how the UK avoids a recession as part of the process of bringing inflation down. And today’s large rate increase will probably be seen in retrospect as an important milestone towards that recession.'

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