The Bank of England expects headline inflation to top 8%

GBP

The Bank of England is expected to raise interest rates further in the second quarter of 2022 as the UK central bank tries to fight soaring prices pressures. The BoE has already lifted the bank rate to 0.75% from 0.1% in late 2021 and money markets are currently pricing in 125 basis points of additional rate hikes this year.

The latest Office for National Statistics inflation release showed headline inflation hitting 6.2% in February, a fresh thirty-year high, while core inflation rose to 5.2% from 4.4% in January. Even higher levels of inflation are expected in Q2 this year.

The latest BoE monetary policy release shows that the central bank expects headline inflation to top 8% in the coming months, citing sky high energy and food prices as the main drivers. It is this inflation against growth problems that will cause Governor Bailey and the members of the Monetary Policy Committee to be flexible and yet still resolute in trying to beat inflation. If the BoE moves too aggressively and too quickly and causes growth to fail then fears of stagflation will hit the UK markets and Sterling as a result.