I was just taking a look at my last post on SONIA about a month ago and comparing to where we are now and its certainly interesting to see the difference a month has made. The top graph is at 18th August and the bottom graph is at 14th September.
There is no doubt in my mind that we are still in a period of economic uncertainty and is the governments single minded approach to inflation going to work at the expense of the economy?
PMI data indicates that the economy should contract, and with wages continuing to grow and unemployment numbers low, will this lead to further inflationary pressures?
BoE Chief Economist Huw Pill remarked last week that rates may not need to rise much further than their current levels to keep inflation under control, but may need to sit at elevated levels for longer.
SONIA in mid-September now reflects the markets interpretation of that by hitting a high of 5.5% while the BoE's view of an extension in the elevated levels for longer is not.
Interesting times! Stay safe out there.
At 18th August
At 14th September