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- High inflation and weak growth remains unfavourable mix for the Pound – MUFG
High inflation and weak growth remains unfavourable mix for the Pound – MUFG
The economic data releases from the UK this week have provided further evidence that the BoE continues to face an uncomfortable mix of elevated inflation and weak growth. Therefore, economists at MUFG Bank expect the British Pound to remain under pressure.
BoE will disappoint rate hike expectations
“The release of the latest UK labour market report revealed that wage growth remains uncomfortably strong amidst tight labour market conditions.”
“The release of the latest UK CPI report for October revealed that inflation surprised to the upside again reaching a new cycle high of 11.1%.”
“Overall, the latest data releases keep pressure on the BoE to keep tightening policy although we still believe that the amount of rate hikes will fall short of what is priced by market participants. The UK rate market is currently pricing in a terminal rate of just over 4.50% for next year.”
“The unfavourable combination of elevated inflation and recession risk in the UK, and likelihood the BoE will disappoint rate hike expectations supports our view that the pound will continue to underperform more broadly.”
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