GBP’s inflation role needs revisiting
BoE policymaker David Miles’ warning on GBP earlier this week indeed proved prescient in the wake of the January CPI report. In stating the currency’s advance was ‘not trivial’, the obvious inference was that such gains represented additional tightening beyond the BoE’s allowance. Amid the UK’s recovery, the conventional view that sterling does not generate material pass-through needs revisiting, as this cycle seems to be different.
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