The Bank of England (BoE) may have reached the peak of its rate hikes cycle, according to the latest UK Economic Outlook by S&P Global (NYSE:SPGI). This assessment comes after 14 consecutive increases that led to a 5.25% policy rate, and is contingent on the current 7.8% pay growth easing.
S&P Global's outlook also points to a significant decline in core and services inflation in August, despite persisting high levels. This development is seen as a potential trigger for the BoE to pause its monetary tightening stance amidst risks of stagflation. However, the central bank might delay any rate cuts until the second quarter of 2024.
In addition to these insights, S&P Global has updated its forecasts for the UK economy. The firm slightly raised its growth forecast for this year to 0.3%, while lowering its projection for 2024 to 0.5%. These revisions reflect the complex economic landscape in the UK, characterized by real wage growth and a targeted inflation rate of 2%.
This report by S&P Global provides a comprehensive view of the UK's economic trajectory as it navigates through inflationary pressures and wage growth challenges. The BoE's monetary policy decisions will continue to play a crucial role in shaping this landscape over the coming months.
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