24 May 2022 - Cost of living crisis is holding back UK economy

Andrew Bailey admitted when speaking at a conference in Vienna yesterday that the cost-of-living crisis is driving the UK into recession. He agreed with a questioner who commented that the effect on real wages of rising inflation is bound to hit demand. However, he refused to believe that the fact that the Central bank failed to respond quickly enough initially drove demand higher and therefore stoked inflation. He went on to say that one of the primary discussions at the Monetary Policy Committee when agreeing the necessary level of tightening revolves around demand and balancing that with bringing inflation lower. A tight labour market is another issue that is stoking inflation with wages now a significant contributor to inflation, while post-Covid, the workforce has fallen by a little over 1%. External shocks are playing a significant part in the volatility of the economy. The rise in energy prices and the conflict in Ukraine have created headwinds that could still blow it off course. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.