Economists predict rise in inflation to 2.6%; US Federal Reserve widely expected to cut interest rates by a quarter point
Last night, it emerged that Japanese carmakers Honda and Nissan will begin negotiations over a potential merger, according to reports.
The Nikkei financial newspaper said on Tuesday that the two Japanese companies would start talks to help combat the increased global competition from bigger electric vehicle makers.
If our forecasts are correct, directionally, this would not come as a surprise to the monetary policy committee: the monetary policy report forecasts factored in a 0.2%pt increase in CPI inflation between October and November. Even so, it would not be welcome to have the degree of overshoot in inflation outturns relative to their forecast widen.
The Bank’s official message has been that maintaining only a gradual pace of rate cuts from here still looks appropriate, with governor Andrew Bailey effectively confirming that means one 25bp cut per quarter. If inflation turns out as we predict, this would be an argument against stepping up the pace of policy easing, even if the UK faces mounting threats to external demand.
