UK Economy & BOE Outlook (with Caroline Hepker)

UK had strong Q1 GDP growth (0.6% QoQ) but outlook is gloomy due to Iran war energy shock. Headline inflation revised up 1.5pp by early next year, causing real income squeeze. BOE expected to hold rates but vote split may widen with more members favoring hikes. Communications credibility at risk if they talk tough but don't act.

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UK Economy & BOE Outlook (with Caroline Hepker)

yields

BOE expected to hold rates but with more hawkish votes and tough talk on inflation. Markets no longer pricing cuts, suggesting upward pressure on yields as BOE maintains or tightens stance.

Caroline Hepker

Walk us through the UK economic picture.
Anna Andrade

Strong Q1 GDP growth of 0.6% QoQ but outlook is gloomy due to Iran war. As a net energy importer, rising energy costs create a stagflationary shock. Headline inflation revised up 1.5pp by early next year, causing real income squeeze. Funding conditions tightened as markets no longer price BOE rate cuts.
Caroline Hepker

What will the BOE do?
Anna Andrade

Focus remains on Iran war impact. Political uncertainty and fiscal policy questions are crucial but BOE takes policy announcements as given. Expect rates unchanged. Vote split may widen - Hugh Pill favored a hike in April, may be joined by Megan Greene, Catherine Mann. No appetite for hike from rest of committee.

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