The Bank of England (BoE) expects the inflation rate, which is currently still in double digits, to fall significantly. Such a development is not yet really discernible in the economic data, though. Thus, economists at Commerzbank expect the British Pound to struggle.

Inflation outlook too optimistic?

“The BoE is hoping for a quick decline in inflation in the course of the year. So far, however, the economic data rather harbor upside risks for inflation.”

“If inflation does turn out to be more persistent than the BoE expects, its rather dovish stance is likely to weigh further on the Pound.”

“GBP weakness is likely to continue next year as well because we expect the BoE to cut its key rate again in view of the weak economy and somewhat lower inflation.”

Source: Commerzbank Research