Capital Economics economist Ruth Gregory said in a note that while July or
September hikes cannot be ruled out, the Bank of England is likely to keep
policy rates unchanged this year. April real GDP contracted, suggesting the
strong start to the year is losing momentum and should limit inflationary
pressure. Rising energy prices are eroding real household incomes; she expects
the economy to stagnate this quarter and next. Services are bearing the main
impact from the Iran war, and industrial production may weaken from May as the
temporary inventory-led boost reverses. Conditions for sustained high inflation
are not in place.
