The economic outlook for the UK remains rather bleak while, at the same time, inflation remains high. Against this background, The Bank of England is likely to act with doubts, which should weigh on the poundaccording to Commerzbank economists.
An economic downturn is probably inevitable
“An economic downturn is probably inevitable. This is because inflation, which remains high, will continue to dampen consumer sentiment and the BoE’s rate hikes year to date will be felt more and more. Also, fiscal policy has little room for expansionary measures due to the tense budgetary situation.”
“As long as the BoE maintains its wavering stance, monetary policy will remain a drag factor for the pound.”
“Another ballast factor is the consequences of Brexit, which are increasingly noticeable in the economy. This also clouds the long-term economic outlook.”
“We expect the BoE to cut its key rate in 2024, so sterling weakness is likely to persist.”
Source: Fx Street
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