JP Morgan say there's a risk that the Bank of England will push interest rates to 7%

<p>JP Morgan economists say their central forecast is a rise to 5.75% (hitting there in November) but warn there are 'potential upside to rates if expectations do become unanchored or remain high'. Which could force the BoE to lift to 7% and precipitate a hard landing recession for the UK economy. </p><p>JPM point to higher nominal wage growth offsetting some of the more costly mortgages even after all the BoE rate hikes, which may push hikes higher, to 7%. Also, business expectations for inflation, forecasts for core prices and Taylor Rule adaptation also indicates to rates of close to or even above 7%.
</p><ul><li>“A break in behaviour, or hard landing, looks increasingly likely at some point over the next year if inflation is to be brought under control in the UK” </li><li>“The main question is whether the BOE will get some help from external sources in delivering this adjustment, or whether it will have to do all the heavy lifting itself.”</li></ul><p>—-</p><p>ps. In a nutshell the Taylor Rules is that if inflation is above target, or if GDP is above potential, a central bank should raise interest rates.</p><p>Not really rocket science. </p>

This article was written by Eamonn Sheridan at www.forexlive.com.