JPMorgan economists say their central forecast is for a rise of 5.75% (to get there in November) but warn of “a possible rate hike if expectations are not met or remain high”. Which may force the Bank of England to rise to 7% and precipitate a severe downturn in the British economy.
JPM points to higher nominal wage growth offsetting some of the more expensive mortgages even after all the BoE’s interest rate hikes, which could push the increases up to 7%. Also, Business Forecasts for Inflation and Forecasts for Core Rates and Taylor Rule Adaptation also suggest rates close to or even above 7%.
- “A break in behaviour, or a sharp fall, appears increasingly likely at some point over the next year if inflation is to be brought under control in the UK.”
- “The main question is whether the Bank of England will get some help from outside sources in introducing this adjustment, or whether it will have to do all the heavy lifting itself.”
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note. In short, Taylor’s rules state that if inflation is above target, or if GDP is above potential, the central bank should raise interest rates.
Not really rocket science.