Capital Economics: Bank of England May Gain Confidence from Demand Slide, Rates Could Peak at 5.50%

Paul Dales, Chief UK Economist at Capital Economics, wrote in a report that the deteriorating UK demand could enhance the Bank of England‘s confidence, indicating that rate hikes are progressing as planned.

Based on the PMI index, economic activity contracted in August.

The weakening economic activity seems to be alleviating price inflation, which is an encouraging sign for policymakers at the Bank of England. However, he added that there is still a possibility of another rate hike by the Bank of England next month.

He said, “On balance, the dual signs of weakened economic activity and eased price pressures make us more confident in the view that rates will peak around 5.50%, rather than the market’s pricing of 6.00%.”