The economic outlook for the UK remains quite gloomy, while at the same time, inflation stays at high levels. Against this backdrop, the Bank of England is likely to act only hesitantly, which should weigh on the Pound, economists at Commerzbank report.
An economic downturn is probably unavoidable
“An economic downturn is probably unavoidable. This is because inflation, which remains high, will continue to dampen consumer sentiment and the BoE’s interest rate hikes to date will be increasingly felt. In addition, fiscal policy has little scope for expansionary measures due to the tight budget situation.”
“As long as the BoE maintains its hesitant stance, monetary policy will remain a burdening factor for the Pound.”
“Another burdening factor is the consequences of Brexit, which are becoming increasingly noticeable in the economy. This also clouds the economic outlook in the long term.”
“We expect the BoE to cut its key rate in 2024, so the Pound’s weakness is likely to persist.”