UK: Economy guided by political vulnerability, uncertainty and Brexit - Westpac

Analysts at Westpac explain that although UK inflation is set to peak in 4Q it is also expected to remain above 2.5% into 2019 while the activity has, so far, held up better than feared.

Key Quotes

“BoE guidance is now for a withdrawal of post-Brexit-vote emergency easing within “coming months”, but markets are pricing hikes in 2018.”

“Although BoE has reduced its downside risks, Brexit remains its key concern. Any deterioration could see BoE adopt a dovish hold in 2018.”

“Household income squeeze. BoE Agents’ Report is showing lower discretionary spending and consumer service employment intentions.”

“Tory Government tensions are increasing into the height of UK’s Party Conference season. Tory and Labour polls are neck and neck. The cost of Brexit is a major stumbling block both within domestic politics and in dysfunctional Brexit negotiations.”