As the Bank of England continues its cycle of rate hikes, the significant drop in output from the UK’s private sector in August has led to a warning from James Smith, Economist at ING Group, that the risks of over-tightening by the Bank of England have increased.
Smith pointed out that while the Bank of England has been focused on reducing inflation, high inflation still persists due to continuous wage growth.
Considering the highly fixed nature of the UK’s mortgage market, much of the impact of the Bank of England’s rate hikes has yet to materialize.
Given these circumstances, the UK economy seems to be gradually slipping into stagnation or even potential recession, though there might be moderate growth in this quarter.
Smith stated that as the tightening cycle approaches its end, the poor PMI data will prompt the Bank of England to pause and reflect.
