Markets expect UK inflation not to peak

The European Central Bank raised interest rates by a massive 50 basis points this week, a move that helped cement expectations for more aggressive rate hikes in the rest of Europe. Investors now believe that a 50 basis point rate hike by the Bank of England next month is almost a certainty. It would be the largest rate hike by the Bank of England since it set monetary policy independently in 1997. Traders expect the Bank of England to raise rates by about 48 basis points on Aug. 4, up from 45 basis points previously. With markets still grumbling over the Bank of England's failure to raise rates last November, this represents a sizable bet that the Bank of England is about to follow suit with a 50 basis point hike.

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According to the economic forecast report released by the British Treasury in June, the market forecasts that the UK’s GDP will grow by 3.6% in 2022 and 0.9% in 2023, down from 3.9% and 1.3% in May, and 4.4% and 2% in February. . The Bank of England, the Bank of England, also previously predicted that UK GDP will fall into recession in the fourth quarter of 2022.

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Markets do not expect UK inflation to peak yet. The British government may raise the energy price ceiling again in October, and the CPI is expected to exceed 11% by then. To curb high inflation, the Bank of England announced last month that it would raise its benchmark interest rate from 1% to 1.25%. It was the fifth rate hike by the Bank of England since December, and the adjusted level was the highest since February 2009. The Bank of England also said it would be particularly vigilant against "more persistent inflationary pressures" and would respond forcefully if necessary.

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The Bank of England is seeking to retain the role of traditional banknotes and coins in everyday transactions, making it an option for consumers as electronic payments grow in popularity. Bank of England chief teller Sarah John said it would be a long time before society went cashless and needed to keep banknotes and coins in widespread circulation. The number of people in Britain using cash only once a month or less more than doubled to 7.4 million between 2017 and 2019, a trend accelerated by the Covid-19 pandemic, Bank of England data showed. Credit cards, debit cards, and other forms of money backed by private companies are gaining popularity.

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The European Commission has announced four breaches of judicial proceedings against the UK government for breaching the Northern Ireland Protocol. The EU accuses the UK of violating the protocol by failing to implement customs inspections on goods exported from Northern Ireland to the UK, unilaterally changing taxes on tobacco, alcohol and other commodities in Northern Ireland without notifying the EU, and failing to implement the EU’s unified VAT in Northern Ireland. method of collection. The above actions violated the Northern Ireland Protocol in the withdrawal agreement signed by the EU and the UK, and the EU decided to initiate judicial proceedings against the UK for breach of contract accordingly.