The United Kingdom is currently experiencing a unique economic situation – positive real interest rates – for the first time since 2008. This means that the Bank of England’s interest rates are higher than the Consumer Price Index (CPI) inflation rate. Currently, the UK’s CPI inflation stands at 4.6%, while the BOE maintains interest rates at 5.25%. This is a significant change from 2015 when interest rates were less than 1%. While this development may bring some relief to the BOE, it is important to note that the unemployment rate remains at a low of 4.2%. The key question now is whether inflation will stabilize at the mandatory 2% target or potentially decrease further, leading to deflation. The BOE’s ongoing challenge lies in controlling wage inflation, which continues to be high and poses a hurdle in achieving the bank’s 2% inflation target.