Britain's bond markets rocket higher after double-digit inflation print
projecting inflation will top out at 13.3% in the fourth quarter, along with huge increases expected to the U.K.'s energy price cap, analysts predict the situation to get worse., one of whom will succeed Boris Johnson as prime minister on Sept. 5 after a poll of party members, are under increasing pressure to offer radical solutions to the country's historic cost-of-living crisis.
"To avoid a large hit to consumers, significant further fiscal stimulus would be required beyond what is currently being proposed by either candidate to be the next prime minister," said Mike Bell, global market strategist at JPMorgan Asset Management. "However, if enough stimulus is provided to largely offset the hit to consumers, then the Bank of England may well feel the need to continue raising interest rates. This could then pose a risk to consumption and the housing market via higher mortgage costs."
Unless wage growth and underlying inflationary pressures moderate on their own, without a rise in unemployment, Bell said U.K. policymakers are "stuck between a rock and a hard place."
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