This is an interesting moment for the UK’s financial markets.
Since May, inflation has been at the Bank of England’s (BoE) target of 2 per cent. Sterling has rallied, and real GDP growth is tracking ahead of Office of Budget Responsibility (OBR) estimates. Buoyed by a steadier political and economic backdrop, the domestic-oriented FTSE 250 index is up 10 per cent over six months.
And yet the handbrake is still on. As evidence, consider how shares in NatWest (NWG) and Lloyds Banking Group (LLOY) have ripped higher as their income surges from the greater debt burden on homes and businesses. By the time you read this, the base rate may have fallen from its 16-year high. But ahead of this week’s Monetary Policy Committee meeting, the chance of a cut was reportedly too close to call.