Downside risks for UK from Omicron appear to be fading

Though the scale of December’s fall in retail sales came as a nasty surprise, it was not simply an Omicron story. We still think the Omicron hit to GDP will be small and short-lived, with the fall in case numbers and evidence of firming social consumption activity in the high-frequency data supporting this view.

What you will learn:

• With downside risks from Omicron fading, February’s MPC meeting is live.
• Andrew Bailey’s comments on the tightness of the labour market were certainly hawkish, and the outcome of February’s meeting looks like a coin toss.
• But we remain sceptical that the data will support more than two 25bp hikes in 2022.