Deutsche Bank: Only 30% of Bank of England rate hike effect passed through to economy

On February 24th, Deutsche Bank stated that based on the assumption that there is a standard linear lag period of 18-24 months in the transmission of monetary policy to the real economy, we calculated that only 30% of the Bank of England’s interest rate hike effect may be transmitted to the economy. It will rise to 75% by the end of this year.

Assuming no interest rate cut next year, the effect of raising interest rates will not be 100% apparent until the fourth quarter of 2024. The Bank of England is likely to raise interest rates one last time in March as monetary policy further weighs on the economy.