Gloomy UK in danger zone as pound set to plunge; worse to come
- Outlook threatens bid to combat economic downturn; heaps fresh pain onto consumers and businesses already reeling from the fastest inflation in three decades
- Few countries have been left unscathed by the pandemic and its inflationary aftermath, but the UK’s decision to leave the European Union made it more vulnerable
The UK is fast becoming the epicentre of the global stagflation crisis, as the Bank of England’s policy-tightening campaign and the soaring cost of living put the world’s fifth-biggest economy on the verge of recession.
It’s about to get even worse, according to a clear majority of market participants in the latest MLIV Pulse survey.
More than two thirds of 191 respondents see the currency tumbling to US$1.15, a 6 per cent decline from current levels to lows unseen even in the post-Brexit chaos. Meanwhile a similar proportion expect 10-year gilt yields to climb to 3 per cent.
The gloomy outlook threatens to hamstring policy makers in their bid to combat the economic downturn, while heaping fresh pain onto consumers and businesses already reeling from the fastest inflation in three decades.
While few countries have been left unscathed by the pandemic and its inflationary aftermath, the UK’s decision to leave the European Union has made it more vulnerable, say 80 per cent of MLIV readers.
As the central bank is forced to tighten policy aggressively, Pulse respondents see 10-year yields gapping higher. All that risks creating a historic cashflow squeeze for British borrowers, just as wavering consumer confidence causes a slowdown in spending.