Ahead of tomorrow’s Bank of England interest rate decision, Karen Ward, Chief Market Strategist for EMEA at J.P. Morgan Asset Management, comments:
“Although headline inflation is decreasing, medium-term domestic inflation indicators remain significantly above the Bank of England’s 2% target. If the economy were slowing, I’d expect core inflation to follow suit, but that’s not what’s happening here.
With real wages returning to positive growth, the economy appears to be gaining momentum. That means the current dip in inflation we’re seeing is likely temporary, with a possible resurgence on the cards for the second half of the year.
By late summer, the Bank of England may have more evidence of easing underlying pressures. However, for now, I think it should communicate that its target is medium-term and, just as it looked through 10% headline inflation, it should also look through a short-term dip in inflation.”
