Thread by @JumanaSaleheen

@bankofengland raises rates by 50bps today and forecasts nflation to 🏔13.1% by end-2022.

It looks like the bank is forecasting a mild #recession with #GDP growth *falling* by 1.5% in 2023.

This is accompanied by a modest rise in the #unemployment rate to 5.75% in 2024.
A 🧵

As I read through the @bankofengland report, I will tweet my commentary here.

Taken from the report:
A #recession2022 is the Bank’s base case forecast.😣

“The United Kingdom is now projected to enter recession from the fourth quarter of this year.”

bankofengland.co.uk/monetary-polic…

“The changes Ofgem has announced to the method for updating the household energy price cap are also expected to push up CPI inflation in the near term…”

This was a worry I set out yesterday.

https://twitter.com/jumanasaleheen/status/1554779008356728833?s=21&t=NGY2d9e-EzTc0l7oGemg1w

https://twitter.com/JumanaSaleheen/status/1554779008356728833

🇬🇧The Bank is calling for a recession starting in 2022 year and lasting till the end of 2023.

🇺🇸 This is in contrast to the Fed, who are still trying to convince the wider public that a ‘softish’ landing is still possible.

#recession means more than two quarters of negative GDP growth. Importantly it means job losses and rising #unemployment.

The latest Bank of England forecasts show unemployment only starting to rise from its current level in mid 2023. It rises to 6.25% by the end of 2024.

“Tight labour markets have probably contributed to the pickup in measures of #wage growth across the UK, US and euro area. Wage growth has increased most notably in the US and UK (right panel of Chart 2.3), and may explain why services inflation in these countries is stronger.”

⛽️No denying that high energy prices play a significant role in pushing up global inflation.
Higher persistent rates of inflation in Europe/UK arise from Europe’s dependency on Russian gas.
The US is a net producer of gas, largely insulated from the European gas price shock.

Higher than expected energy prices (and inflation) has led markets to:

1️⃣revise up their view of the terminal rate, and

2️⃣“front-load” those rate hikes.

You can see that from the chart below 👇🏽 (solid lines are higher and steeper). In line with recommendations from @BIS_org