August 04, 2022 11:00 GMT
The Bank of England's August monetary policy report lifted the expected peak infFation to 13.3% in October, this is around 2pp hotter than in the May forecast.
- This is driven by intensifying global price pressures and the Ofgem price cap rise to around 75% (vs the May assumption of 40%).
- Due to some signs of easing global pressures, the BOE shifted from highlighting upside inflationary risks to a more balanced risk assessment. An increase in global energy and commodity prices due to knock-on effects of the Ukraine war and Covid resurgence risks would shock to the upside, whilst agreements easing grain exports and geopolitical tensions or efficient substitution of goods in efforts to ease supply shortages could all see inflationary pressures easing faster,
- Risks to GDP are also seen as balanced, as business sentiment continues to see some activity growth and could underscore more resilient demand than currently anticipated.
- Labour market resilience could underpin this, especially if pandemic savings continue to act as a buffer. Current forecasts imply five consecutive quarters of negative growth through Q4 2022 and 2023.