- The UK is struggling with high inflation.
- Although the Bank of England has not changed its monetary policy yet, it is a possibility in the future.
- Economists at ING expect the bank to begin phasing out its bond-buying program by the end of this year and raise interest rates by 2023.
UK inflation is expected to rise sharply next year.
The relatively high rate level will remain temporarily, according to the BoE, but in the longer term a “modest tightening” of monetary policy may be necessary.
This comes after the Bank of England’s new interest rate decision. At the moment, interest rates have not yet been raised and other support measures remain the same. But there are concerns. According to a statement, the decision was not unanimous. One CEO was so concerned about rising inflation that he preferred to see monetary support decline as quickly as possible.
UK inflation rose to 2.5% in June, above the long-term target of 2%. And that’s not all. It is likely to peak at around 4 per cent next year.
One of the contributing factors is that inflation has risen significantly recently due to the sharp rise in oil prices. Prices of raw materials and semi-finished products such as building materials have also risen as a result of temporary production shortages, and those higher prices can also be passed on to customers.
Read also: This is the real reason why everything is suddenly so expensive
ING expects to change policy for the first time at the end of this year
High inflation can hamper the recovery of the economy, which is why central bankers are paying close attention. However, financial markets in general did not expect monetary policy adjustment. So the interest rate decision was not surprising.
Read more on Business Insider
ING economists estimate that the Bank of England will raise interest rates somewhat in early 2023, and perhaps a little sooner. Experts expect the central bank to begin phasing out its bond-buying program later that year, as it appears now.
Read also: Inflation drops to 1.4%: The gap with the highest savings interest narrows again
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