- The Bank of England's decision to leave its key interest rate unchanged at 4.5 per cent was not a surprise.
- Housing transactions, mortgage approvals and gross mortgage lending have all strengthened in recent months. The market should remain well supported to the end of the year, with house prices remaining broadly stable.
- Recent evidence on household spending does not yet point to the expected strengthening. With inflation above the 2% target there is concern that inflation expectations might be revised upwards, creating a policy problem for the future.
- The market is discounting a cut in rates to 4.25% in the early months of next year. This is in line with our view that rates will fall once it is clear that inflation has peaked.
