Earlier we had Bank of Japan Governor nominee Ueda remarking on the lag in monetary policy impacting the real economy.
Deutsche Bank have noted this in the context of Bank of England rate hikes:
- with the MPC ascribing to an 18-24 month lag for rate hikes to fully feed through into the real economy much of the pass-through has yet to actually feed through into the economy. While there's plenty of uncertainty around this estimate, assuming a standard (and linear) 18-24 month lag in monetary policy transmission, we calculate that only 30% of the Bank’s rate hikes have likely already fully fed through into the economy, rising to 75% by the end of the year.
- Full pass-through of rate hikes won't come until Q4-2024 (assuming no rate cuts next year).
As for the DB outlook for the BoE ahead:
- despite some signs of resilience in the survey data, we expect dovish voices on the MPC to grow louder over the coming meetings.
- In our view, a March hike will likely be the last before the MPC positions itself more explicitly for a 'conditional pause' in the hiking cycle as more of the policy effects from rate hikes feed through into the real economy.
