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LONDON, June 18 (Reuters) – UK inflation may surpass 3% before the Bank of England feels unwell, according to a Reuters poll of economists which also said the economy would grow faster than not expected this quarter as more pandemic restrictions are lifted.
The central bank has an inflation target of 2%, but the rate unexpectedly exceeded that rate in May for the first time in nearly two years and hit 2.1%, as part of a rise in prices. price after foreclosure that is expected to accelerate. Read more
Inflation will peak at 2.4% in the last quarter of this year before gradually declining, according to the June 14-17 poll. The Bank will tolerate it at 3.0-3.5% before experiencing any discomfort, according to the medians.
“We believe that high inflation will be temporary as this year’s price increases give way to a more pronounced fall in inflation next year due to base effects,” said George Buckley at Nomura.
“At the same time, we expect the BoE to want to protect what could turn out to be a fragile recovery, with production well below its pre-pandemic path. “
Britain has suffered the highest number of COVID-19-related deaths in Europe, but a rapid deployment of the vaccine has allowed the government to open up parts of the economy and lift some of the strict restrictions imposed to prevent the spread of the virus. Read more
The economy will therefore grow by 4.4% this quarter, stronger than the 4.1% forecast a month ago. For 2021, growth was set at 6.2% and in 2022 at 5.2%, according to the latest survey.
While the government delayed a further easing of restrictions for a month on Monday due to the rapid spread of the more infectious variant of the Delta coronavirus, it is not expected to have a significant impact on the overall economy.
“As long as the restrictions are relaxed over the next few months, there would still be a good chance that COVID-19 would not significantly reduce the future level or rate of GDP growth,” said Paul Dales of Capital Economics.
Like its peers, the Bank of England eased monetary policy at the start of the pandemic last year, lowering the bank rate to a record 0.10% and restarting its quantitative easing program.
None of the 67 economists surveyed expected a change in borrowing costs at the Monetary Policy Committee meeting on June 24.
It will be until 2023 before the Bank hikes rates, according to survey medians, but with rising inflationary pressures and improving growth prospects, more and more economists are now expecting a earlier decision than before.
While the first expectation of a hike was only in the third quarter of 2022, nine out of 50 economists in the latest poll predicted an increase before the end of next year compared to four out of 35 last month. The median for the end of 2023 has been increased to 0.50% against 0.25%.
“The debate on whether or not to increase the bank rate at some point next year should become more balanced. And, if the upside surprises continue, calls for a rate hike on the MPC could get louder, ”said Chris Hare at HSBC. .
(For other articles in Reuters Long-Term Global Economic Outlook poll package:)
Reportage de Jonathan Cable; Sondage par Mumal Rathore, Prerana Bhat et Susobhan Sarkar ; Montage par Steve Orlofsky
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