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Thursday’s Bank of England (BoE) meeting is unlikely to prove too exciting for markets, with the current monetary stimulus all but guaranteed to stay the same. However, with inflation on the rise, is there reason to believe the BoE could be forced into a more hawkish mindset?
UK inflation currently stands at 1.2% (of annual CPI), representing a two-year high. Crucially we are seeing a significant culmination of both rising inflation at home due to a weak pound alongside a wider global reflation pattern. With Europe and the US all exhibiting rapidly increasing inflation, the UK is clearly heavily exposed to a double whammy effect which could see inflation well overshoot the 2% target. The chart below highlights this clear turn in fortunes for inflation.