In Brief

UK

• 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.

Europe

• 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.