Mitsubishi UFJ Bank: If the Bank of England and the European Central Bank aggressively raise interest rates, the pound and euro may only rise temporarily.

MaticHoleFiller · 2026-04-11T08:06:47+00:00

Lee Hardman of Mitsubishi UFJ Bank pointed out that if the Bank of England and the European Central Bank raise interest rates beyond market expectations, the pound and euro may struggle to maintain their gains. Although rate hikes in the short term could support the currencies, if they lead to an economic recession, these gains will be temporary. Weak growth data from the UK and Eurozone may also dampen rate hike expectations, but persistent inflation shocks could still prompt central banks to raise interest rates.

MaticHoleFiller

2026-04-11 08:06:47

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Lee Hardman of Mitsubishi UFJ Bank stated in a report that if the Bank of England and the European Central Bank raise interest rates more aggressively than market expectations, the pound and euro may struggle to sustain any gains. Although faster rate hikes could provide some short-term support for the pound and euro, “if tighter monetary policy and higher energy prices trigger a deeper economic slowdown/recession in Europe, these gains will ultimately prove to be temporary.” The weak growth momentum indicated by Tuesday’s UK and Eurozone purchasing managers’ surveys may dampen expectations for more aggressive rate hikes. However, he noted that if inflation shocks prove to be more persistent, the Bank of England and the European Central Bank may still raise interest rates.

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