Is mighty British shopper getting exhausted? The BoE is watching carefully
From the minutes:
The Committee expects a slowdown in aggregate demand over the course of this year, as household demand growth declines in reaction to lower real income growth. Official estimates of retail sales have weakened notably, consistent with this expectation, although other indicators of consumer demand such as consumer confidence have been steadier.
Who’s right? Markets or the general public? Something has to give
For some time, financial markets and households appear to have had different perspectives on UK economic prospects. This difference cannot persist indefinitely, and the nature and timing of its resolution are likely to be key factors in the MPC’s policy assessment.
The sterling impact in full
CPI inflation increased to 1.8% in January, and the MPC expects it to rise above the 2% target over the next few months, before peaking at around 2¾% in early 2018 and drifting gradually back down towards the target thereafter. The projected overshoot entirely reflects the expected effects of the drop in sterling.