Proactive Investors - The economic waters around Britain are certainly choppy, but Clive Black, head research at Shore Capital, urges caution against being swept away by the waves of political hyperbole and calls for interest rates to be hiked no higher.
While he acknowledged no doubt that high UK inflation, especially for essentials such as energy and food, has been a particular source of pressure for low income households, he balks at the term 'crisis'.
He says too many Bank of England policymakers have been “led by 'markets' rather than the real economy when it comes to monetary policy, noting that high inflation is regressive and hits the poor most."
This week's figures from the Office for National Statistics showed UK wages rising 7.8%, finally outstripping consumer price inflation at 6.8% for June.
Black said this crossover had arrived sooner than his prediction of autumn and he expects this "positive to neutral living standards" to be a feature of the UK consumer economy for at least four-to-six quarters.
He said virtually full employment has been a "key blessing of the economic travails faced by the UK in recent years", with employment levels remaining at record levels, and unemployment low, albeit the latter has climbed to 4.2% from 3.7% at the end of last year.
The persistent core inflation (6.9%) might be a cause for concern, but Black advocates prudence from the Bank of England in letting the current 5.25% base rate run its course.
"The MPC is a detached body from the real British economy - farming, manufacturing, hospitality, technology - made up of no doubt very 'nice' people who have spent most if not all of their working lives studying at Oxford/LSE, banking with US financial institutions, or sitting within the narrow group think of The Treasury. That MPC missed the obvious need for higher base rates after unnecessarily sustaining quantitative easing and sitting on zero interest rates. Whilst far too late, the increase in UK base rates have been necessary but also rapid.
"It takes time for base rates to take effect and given the narrative around the UK labour market set out above, we believe that it is now time for the Bank of England to take stock and pause rate rises in the absence of new information."
A shift from a fixed 2% inflation target to one of 1-3% might provides the Bank's monetary policy committee with "more wiggle room to reflect upon and set base rates taking into account wider economic priorities such as not overly damaging the firm labour market".
Most households will welcome the easing of UK inflation and the growth of wages, which he said is likely to be reflected in consumer confidence data, though noted that "not everyone is receiving a pay rise".
For investors, he suggested it should feed into improved investor sentiment towards generally lowly rated UK consumer equities, especially discretionary consumer goods.