New York City
Tuesday, July 23, 2024
“THE CEO PUBLICATION owns both and websites"


Bank of England's problem worsens as inflation and the labor demand still burn

June 21, 2023: Economists say that the Bank of England is “caught between a rock and a hard place” as it prepares for a critical monetary policy decision against sticky inflation and a tight labor market.

May’s consumer price index figure will be published Wednesday morning before the Bank’s Monetary Policy Committee (MPC) announces its next move on interest rates.

Since the last meeting, data points have indicated persistent tightness in the labor market and underlying solid inflationary pressures alongside mixed but surprisingly resilient growth momentum.

Economists now expect the Bank to prolong its tightening cycle and lift interest rates to a higher level than previously anticipated.

British 2-year government bond yields rose to a 15-year high of 5% on Monday ahead of the expected announcement of another 25 basis point rate increase on Thursday.

Since November 2021, the Central Bank has embarked on a series of hikes to take its base rate from 0.1% to 4.5%, and market pricing now suggests it may eventually top out at 5.75%.

Headline CPI inflation came in at 8.7% year-on-year in April, down from 10.1% in March, but core CPI (which excludes volatile energy, food, alcohol, and tobacco prices) increased by 6.8% compared to 6.2% the previous month.

The Organization for Economic Cooperation and Development projected that the U.K. would post annual headline inflation of 6.9% this year, the highest level among all advanced economies.

Adding to policymakers’ collective headache, labor market data last week came in far more robust than expected. Unemployment defied expectations to fall back to 3.8%, while the inactivity rate also fell by 0.4 percentage points.

Regular pay growth (excluding bonuses) was 7.2% in the three months to the end of April compared to the previous year, also exceeding consensus forecasts. Regular private sector pay growth, the Bank’s key metric, hit 7.6% year-on-year.

Regarding economic activity, May PMIs moderated slightly below consensus. Still, they remained in expansionary territory, and U.K. gross domestic product unexpectedly contracted by 0.3% month-on-month in March before rebounding partially with 0.2% growth in April.

Get The Latest Updates

Subscribe To Our Weekly Newsletter

No spam, notifications only about new products, updates.
Receive the latest news

Request for online magazine

Join Us

Advertise with us

meteroid vecrtor
Receive the latest news

Contact Us