The Bank of England (BoE) might soon reach the end of its rate hike cycle. Thus, economists at Commerzbank maintain a bearish GBP view.

Sceptical view towards Sterling

“The BoE is clearly concerned that the significant rate hikes might slow the economy excessively. In view of the painfully slow fall in inflation rates, the question nonetheless arises whether concerns of this nature may be a little premature. It is important to avoid second-round effects right now, and inflation expectations need anchoring. In this context, any doubts in the BoE’s ability to fight inflation in a determined manner would be counterproductive.”

“It is of little use that the BoE warns inflation might be more stubborn and that the BoE should therefore remain vigilant if it points out at the same time that it would like to end its rate hike cycle sooner rather than later and that any small improvement of the data might be sufficient reason to do so. Against this background, we stick to our sceptical view towards Sterling.”