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Yesterday Bank of England's inflation letter was published and we've wondered what's inside. Serhii Zhdanov from EXMO had a look into it.
Serhii Zhdanov (EXMO): The Bank of England's (BoE) inflation letter outlines the reasons why inflation has moved away from the target. External factors such as a sharp rise in energy prices, as well as the war in Ukraine, contributed to a sharp increase in inflation. However, recently, inflationary pressure has shifted to internal factors. This happened due to an increase in clothing, shoes, food and non-alcoholic beverages prices. Also, the unemployment rate remains at historically low levels, and the stock of vacancies in relation to the number of unemployed remains high.
Serhii Zhdanov (EXMO): The prospects for inflation were also touched upon. CPI is still expected to drop significantly in the second quarter of 2023 to a lower level than seen previously. This lower-than-expected figure was caused by falling wholesale energy prices. Inflation in the service sector is expected to remain broadly unchanged in the near future. However, wage growth is likely to slow faster than the February report predicted. GDP is expected to increase slightly in the second quarter of 2023.
Serhii Zhdanov (EXMO): The regulator will continue to closely monitor signs of continued inflationary pressures, including tight labor market conditions, wage growth and services. If necessary, further tightening of monetary policy will follow. The Central Bank will take the necessary measures to ensure that inflation returns to 2%.
