Bank Of England’s Apocalyptic Prophesies Fall on Deaf Ears
With the next UK prime minister likely to slash taxes, the central bank’s gloomy prognosis is being ignored by financial markets.
Traders aren’t buying the story Andrew Bailey is selling.
Photographer: Hollie Adams/BloombergThe Bank of England delivered an unusually apocalyptic economic outlook at last week’s quarterly economic review, overshadowing the biggest interest-rate hike in more than a quarter of a century. Yet UK markets have barely moved, and their skepticism is entirely understandable and completely justified. Like a bad pianist playing the right notes but not in the correct order, the central bank’s doom-mongering has fallen on deaf ears among traders who reckon its forecasts are an exercise in futility given the fiscal splurge that’s coming from whoever becomes the next prime minister.
The BOE now expects inflation to peak at 13.3% this year, with annual price gains still close to 10% in a year's time. The real shocker, though, is its long recession forecast, with no growth expected for almost two years and an overall contraction in gross domestic product of more than 2%. Unemployment is expected to rise by two-thirds from its present 3.8% level.