The old mantra that central banks are likely to look through the inflationary effects of energy price shocks no longer applies, at least not everywhere.
What you will learn in this report:
Using our Global Economic Model, our updated energy price assumptions suggest that inflation in Q4 this year for the UK and Eurozone will be roughly 0.5ppts-0.6ppts higher than previously expected – a greater impact than elsewhere.
The Bank of England’s Monetary Policy Committee is likely to remain on hold for now, keeping policy in restrictive territory.
The European Central Bank is also likely to keep rates on hold in the near-term. But with rates already at a roughly neutral level, the ECB may opt to tighten this year if the surge in energy prices persists.
