Economists at TD Securities view risks to the inflation outlook as skewed to the downside. But the Bank of England could deliver further rate hikes until a terminal rate of 4.25%.

Inflation risks are skewed to the downside

“After a prolonged period of time with risks to inflation firmly on the upside, we now think the risks are skewed to the downside as input costs continue to normalize and demand conditions deteriorate further.”

“Our forecast calls for 50 bps hikes to Bank Rate in December and February, with a final 25 bps hike in March that takes it to a terminal rate of 4.25%.”

“Should downside risks to inflation (and the labour market) materialise in the coming few months, however, the risks are that if anything, the BoE might stop its tightening cycle at a slightly lower terminal rate.”