Analysts: Bank of England Should Be More Hesitant on Rate Hikes Than ECB

On June 12, Berenberg analysts stated in a report that it seems reasonable for the Bank of England to be less willing to raise interest rates compared to European central banks. They noted that the UK labor market is weaker than that of the Eurozone, and the services sector is no longer significantly driving inflation as it once did. Berenberg's analysts added that, prior to the energy shock, interest rates were more restrictive, and fiscal conditions remain tighter. They mentioned that after a strong start to the year, the country is currently facing a slowdown in economic activity due to the impact of the war in Iran. The first quarter has already appeared weaker than it seems due to a 'statistical illusion' caused by changes in seasonal spending patterns since the pandemic. Berenberg's analysts stated, 'We expect stagnation this summer, with quarterly GDP growth rates of zero for the second and third quarters.'