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UK economic activity continued to rebound strongly in the second quarter, helped by a successful vaccine rollout, sustained reopening and supportive fiscal and monetary policies.
Although inflation has increased, the Bank of England (BoE) views the projected inflation overshoot as transitory and has prioritised safeguarding the recovery.
The recovery is expected to strengthen into the second half of 2021, however, downside risks including a resurgence of the virus and the roll-off of fiscal stimulus remain a concern.
At its June policy meeting, the European Central Bank (ECB) revised up its growth and inflation forecasts for 2021 and 2022, though the longer-term inflation forecast remains significantly below target at 1.4%.
Despite these revisions, the central bank made no changes to its policies and confirmed its dovish stance.
Short-term interest rates remain firmly anchored, with money market rates close to record lows.