Last week’s August Monetary Policy Report from the Bank of England dropped the bombshell that the Bank expects the UK economy to enter a recession towards the tail end of this year, and to continue to contract throughout 2023 and the early part of 2024. Its modal forecast suggests that the economy will shrink by 2.2% over that period, implying a UK recession that is similar in depth and duration to the early 1990s. The IMF’s forecast, released at the end of July, is a little more optimistic but still shows the UK growing slower than its G7 peers.
UK central bankers are caught in a bind — ordinarily, they would loosen policy when the economy is expected to contract. However, they would also normally tighten policy when inflation is materially above their 2% target (the Bank now expects it to peak around 13%).
Refresh this chart in your browser | Edit the chart in Datastream
_________________________________________________________________
Refinitiv Datastream
Financial time series database which allows you to identify and examine trends, generate and test ideas and develop view points on the market.
Refinitiv offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.
