Chief Economist’s Weekly Briefing – Wait and watch

Good news on the UK economy remains thin on the ground. Economic output is flat-lining, the labour market is cooling, and credit conditions are set to tighten. Nevertheless, the Bank of England remains focused on taming inflation, even if that means higher re-mortgage costs for households. Growth in the second half will be contingent on how aggressively households rein in spending. A drop in energy bills from this month should offer some solace, but the rest is left to be seen.

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Chief Economist’s Weekly Briefing – Beleaguered

Although the UK economy has fared relatively well in the first half of the year, several headwinds persist, both for short-term and medium-to-longer-term performance. Foremost amongst the latter is the sustained weakness in productivity. Meanwhile the inflation outlook is uncertain with wages and prices still chasing one another upward. With the final destination for interest rates unknown, the hoped for economic ‘soft-landing’ still can’t be banked on.

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Chief Economist’s Weekly Briefing – More to come

The battle against high inflation is not over yet. Granted, business surveys show prices to be a waning area of concern, as firms now fear muted demand. That seems to be corroborated by a dip in consumer spending. But wages are still on the rise. So barring a minority of dovish voices, the Bank of England’s resolve to bring inflation back to target remains firm. More hikes are coming. 

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Chief Economist’s Weekly Briefing – Hawks and hikes

Bank of England policymakers turned more hawkish last week, raising rates by an even greater amount and refusing to offer any pushback to markets that are pricing further rate hikes in coming months. Mortgagers are at the receiving end of higher interest rates. Across the wider economy tremors are already being felt, in areas like construction and business activity. Elsewhere, the story is no different, with a slowdown materialising in the US and the Eurozone.

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Chief Economist’s Weekly Briefing – Pause, Cut, Raise

With major central banks (Fed, ECB, People’s Bank of China) adopting divergent stances on monetary policy last week, all eyes are on the Bank of England this week. Rates expectations have steepened as the economy continues to fare well, and high wage growth points to sticky inflation. Another quarter-point hike seems like a done deal.

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Chief Economist’s Weekly Briefing – Signs of Life?

As temperatures around the UK begin to hot up, there is added cause for optimism on the horizon. Energy prices, though still a pressing issue, are receding. Globally, there are positive signs of a bounce-back despite enduring inflationary undertones. Sticky core inflation presents a tricky balancing act between sustaining the recovery, controlling price pressures, and maintaining financial stability. Ahead lies a busy week for central banks, with the Fed and European Central Bank in action. The key question for now is: are we done with the tightening campaign?

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Chief Economist’s Weekly Briefing – Caution is Key

If the phrase “self-fulfilling expectations” is anything to go by, taming inflation will continue to be tough. Businesses are doubtful of the central bank’s messaging on projected inflation. They expect it, and wage growth, to remain elevated. Consumers are growing cautious too. Many households are prioritising debt repayments in the face of high rates. Elsewhere, US job market is still strong but easing, while China’s economic recovery is losing steam.

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Chief Economist’s Weekly Briefing – 5 is the magic number

All those thinking that May saw the end of interest rate hikes, think again. With the economy performing better than anticipated, but core and services price inflation remaining stubborn, many now think the Bank of England will be pressed to advance monetary tightening a tad bit more. An economy that has so far remained fairly resilient to higher rates may yet face a sterner test. 

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Chief Economist’s Weekly Briefing – Meeting Expectations?

We are close to a turning point in monetary policy, but the full weight of rate rises to date have yet to be felt. And it might get worse for households in the near future. Firms have started cutting bonuses. And mortgage payments are going to shoot up. Any good news? The Bank of England is expecting the headline rate of inflation to show the first large drop this week, meaning prices would still be on the up, just not as rapidly as they have over the past year. Locally, another election is over. Back to porridge for the politicians. But back to Stormont?

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Chief Economist’s Weekly Briefing – More is less?

Whether the Bank of England’s monetary tightening cycle has ended is yet unclear. Sure, the Bank has more upbeat views about the UK’s economic future. But there are still some unknowns. The full impact of high interest rates is yet to be felt. Firms haven’t paused hiring but are making cautious changes in types of staff hired. And while there is still some momentum left in growth, how long would it last?

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