Is the worst behind us?

This week’s data contained encouraging signs that inflationary pressures are fading, and the risks to our view that Bank Rate will rise to 4.5% this year now lie to the downside. The January MSCI data also included good news for investors, with all-property equivalent yields seeing only a marginal rise. While valuations are still stretched and we doubt property yields have peaked, this week’s data provide support to our view that the worst is now behind us and yield rises this year are set to be limited to around 30bps.