It’s become clearer that domestic inflation isn’t going to fall while economic activity is strengthening. As such, we now think that the Bank of England will have to raise interest rates further, from the current rate of 4.50% to 5.25%, to generate the economic weakness required to quash inflation. So unlike the Bank, the OBR, the IMF and most other forecasters, we are not taking a recession out of our forecasts.
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