BOE Assumptions Suggest Hawkish Tilt on UK Rates, Economists Say

The Bank of England may respond more aggressively than expected to soaring energy prices since war broke out in the Middle East because its internal models assume a large and long-lasting impact on inflation.

Work published by the central bank at the end of last year suggests it will adopt “a more hawkish tone than we expect,” according to Dan Hanson, chief UK economist at Bloomberg Economics. Taking the analysis literally, the energy shock “could well prompt a screeching hawkish turn” from recent expectations of rate cuts.