High job vacancies indicate a tight labor market that is supportive of higher wage growth, Gill highlighted, while hours worked and labor force participation rates suggest significant spare capacity. is experiencing significant supply bottlenecks and a highly uncertain inflation outlook due to conflicting signals between indicators,' said Gurpreet Gill, macro strategist for global fixed income at Goldman Sachs Asset Management. GDP grew 0.4% in August after an unexpected contraction of 0.1% in July, as staff absences linked to the Covid-19 Delta variant surged. August's 3.2% annual climb was the largest increase since records began in 1997, and vastly exceeded the Bank's 2% target. The path to tightening is complexĬentral to the MPC's headaches is the unique nature of the pandemic recovery, in that policy stances can shift as incoming data evolves, particularly with regards to growth and inflation.īritish inflation slowed unexpectedly in September, rising 3.1% in annual terms, but analysts expect this to be a brief respite for consumers. Whether or not the Bank hikes rates on Thursday, Berenberg expects the MPC to send a clear signal in its forward guidance. 'In essence, the market seems to expect a BoE policy error in the coming years in the form of an over tightening in 2022 that needs to be corrected with modest rate cuts thereafter.'Īs such, Berenberg believes a first move on December 16 and an increase to 0.75% by the end of 2022, with further hikes in 2023 taking the Bank Rate to 1.25% around a year later than current market expectations.

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