BoE: More restrictive monetary policy might put strong pressure on the economy and Sterling – Commerzbank

Economists at Commerzbank analyze the Bank of England's (BoE) policy outlook and its implications for the British Pound (GBP).

Fears of a recession in the UK

The fact that the BoE hesitated for so long means that in the end, an even more restrictive monetary policy will become necessary to anchor inflation expectations and limit second round effects, which might put strong pressure on the economy.

So whereas on the one hand, a more hawkish BoE approach – that is certainly the impression the central bank gave more recently – is positive for Sterling, the concerns about the effects on the economy leave a bitter taste. And that is likely to make it more difficult for Sterling to record gains, regardless of a continued rise in rate expectations.