A bearish forecast has been given, contradicting previous predictions by Citi and Goldman who admitted their mistake in betting against the pound. The bearish outlook suggests that households will begin to feel the impact of higher mortgage rates, as fixed-term mortgages expire. This has already led to a stumble in the housing market. Nomura analysts support this gloomy outlook and present five reasons why the pound will continue to decline.
Jordan Rochester at Nomura highlights falling UK factory gate prices as an indication that consumer prices inflation will soon decrease. However, the Office for National Statistics (ONS) suggests that inflation may be higher than reported due to the tight labour market and ongoing cost-of-living pressures. The ONS identifies the price of a cup of coffee or a restaurant meal as key indicators of underlying price pressures, with inflation in this sector currently at 9%. This is significantly higher than the headline consumer prices inflation rate of 6.8% and the current services inflation rate of 7.4%, both of which remain worryingly high.
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