Bank of England policy lacks new direction

The U.S. dollar index has hit historical highs in a row, and the pound has to bow down and fall under the pressure of the strong U.S. dollar. However, we have also seen that inflation in the UK has also soared to 9.1%, and the Bank of England has also released information on raising interest rates by more than 50 basis points during this period, but investors are not so sure, and the strength of the dollar is far from overshadowing Sterling shines.

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The Bank of England has raised interest rates five times since December in an attempt to prevent high inflation from stubbornly taking root in the UK economy. While growth was stronger than expected in May, other indicators pointed to weakening momentum in the UK economy, making it more difficult for the Bank of England to fight inflation by raising interest rates without slowing the economy too much. While sterling investors hope the government will try to avoid being distracted by political scandals and focus more on providing coherent policies for the economy after Brexit, the jury is still out. Sterling may lack a new direction until a new prime minister takes office.

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The Fed is more likely to raise rates by 75 basis points for a second straight month at its July 26-27 meeting, rather than the 100 basis points that economists have predicted in recent days. Fed Governor Christopher Waller said a 75 basis point rate hike is already a lot. Just because it didn't raise rates by 100 basis points doesn't mean the Fed wasn't doing its job.

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Economists polled by The Wall Street Journal say there is a 49 percent chance that the U.S. economy will slip into recession in the next 12 months. About 46% of economists expect the Fed to raise interest rates too much, causing unnecessary economic weakness, 12.3% of economists believe the Fed will raise interest rates too little, and 42% of economists say the Fed will raise interest rates by an appropriate amount. Balance inflation and economic growth.

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Bank of England member Saunders: Further monetary policy tightening is still possible in the coming months. The UK economy faces demographic challenges. Continued sluggish labor force growth is a risk. Bank of England member Sanders will resign from the Monetary Policy Committee after a vote in August. The cost of Britain's tightening policy is too small. A tightening cycle may occur. The UK faces excess demand and potential sluggish economic growth. The need to maintain (and strengthen) the credibility of the MPC is an important consideration in the current monetary policy setting process. The cost of not tightening the policy in time is relatively high.