Henry Occleston
Summary UK headline inflation ticked back up in headline and core and remained stable in services. This was a broad beat versus consensus and slightly above MPR expectations. Beats in food appear to be beef and dairy related. But we would not write this off as transitory given sector inflation has been rising consistently YoY […]
Henry Occleston
Summary The MPC voted for no change in bank rate (4.25%), as expected. Minimal statement changes included adding a clearer indication of ‘slack opening up’ in the UK economy. We still expect the BoE to cut again in August and cut to 3.5% this year. Market Implications We remain long SFIZ6 in our model portfolio, […]
Henry Occleston
Summary With no presser and no update to forecasts, the BoE’s policy announcement is unlikely to be eventful. While cracks continue growing in the UK economy, data has not derailed sufficiently enough for the BoE to change tack. We expect inflation to roughly align with May’s MPR: headline below consensus but core higher. We analyse […]
Henry Occleston
Summary The BoE cut 25bp as expected. Pill’s backing for a pause was an unexpectedly hawkish surprise. So too was Bailey’s comment that the decision among centrists was a coinflip until the tariff announcement. We retain our central case that they skip cutting in June but will have the evidence needed to accelerate cuts from […]
Henry Occleston
Summary We expect the MPC to cut 25bp this week, with Dhingra and possibly Taylor backing a larger cut. Forecasts are likely to be more dovish on tariffs, low energy costs and undershooting wage growth. This and broader tariff uncertainty will add to a dovish tone in the statement – but we do not expect […]
Henry Occleston
Summary The BoE’s March meeting aligned with our expectation, albeit with less dovish voting. We read little into this. The bar is high for data to prevent quarterly cuts. However, by August, we expect fiscal tightening, labour market loosening and soft core services inflation will push the BoE to accelerate cuts. February inflation will struggle […]
Henry Occleston
Summary We expect the BoE to leave the bank rate unchanged at 4.5%, with Dhingra, Taylor and Mann voting for another cut. We would be unsurprised if Mann backed another 50bp cut: our BoE LLM sentiment index supports her fear that transmission to financial conditions has weakened. The minutes will indicate whether this view has […]
Henry Occleston
Summary The BoE cut 25bp, as expected. MPR forecasts were bearish, and comments still indicate more cuts ahead. I read little into the two 50bp votes. Upward revisions to MPR near-term inflation forecasts exceeded our expectations, with smaller impact from one-offs than we anticipate. Despite labour market loosening, medium-term inflation is below target but still […]
Henry Occleston
Summary We expect the BoE will cut rates by 25bp this week, with an 8:1 vote split. The updated MPR projections will likely be much more bearish on the labour market and GDP, despite strong wage growth. Along with updated supply-side analysis, this should see inflation undershooting target by even more in the medium term […]
Bilal Hafeez
Speech given to members of a leading UK political party in London on 5 December 2024. The UK’s Fundamental Problem: Productivity Rather than talking about the recent UK budget or other such announcements, I would rather discuss the broader context of what hampers the UK economy. From there, we can then understand which are the […]
Henry Occleston
Summary The BoE cut 25bp last week as expected. The MPR forecasts and tone of comments were largely in line with our base-case expectation. Inflation was revised down near-term, but revised up in the long-term too, albeit with the positive skew removed as per our base-case. Headline and core CPI profiles to year-end seem reasonable, […]
Henry Occleston
Summary We expect the BoE will cut rates by 25bp this week, with a 6:3 vote split. The accompanying MPR will be important, there are many moving parts, particularly the inclusion of the UK’s new budget. My expectation is that BoE look through much of the budget impact, retain expectations for further gradual easing, and […]
Richard Jones
Summary This week’s UK inflation data was weaker than expected, with headline and core at the lowest levels since 2021. This has weighed on UK yields and GBP and increased the probability of two 25bp BoE rate cuts in November and December. Market Implications We expect further downside for UK yields and GBP. We like […]
Henry Occleston
Summary The BoE voted (almost unanimously) not to cut in September and explicitly guided a ‘gradual approach’ to easing. However, we think recent data continues to suggest dovishness. Meanwhile, Greene and Mann (hawks) show increasing concern with consumer weakness. We are less optimistic than both on the outlook for the UK consumer based on the […]
Viresh Kanabar, Ben Ford
Summary Core and services inflation rose to 3.6% YoY and 5.6% in August. And while core now sits above BoE forecasts (3.4%), services inflation remains below. Meanwhile, wage growth is decelerating too slowly to force the BoE into a September rate cut. Assuming the BoE maintains a monthly pace of £100bn for balance sheet reduction, […]
Henry Occleston
Summary A September cut may require a continued undershoot in headline and services inflation (our expectation) and signs of further labour market easing (less certain). The September meeting will also see a decision on QT for the year ahead. Given the maturity profile, the risk is skewed towards slower active sales. This would present more […]
Henry Occleston
Summary The BoE cut 25bp, in line with economist consensus. We had been low conviction on the decision but have long been dovish on the BoE outlook and positioned accordingly. The vote was tight, 5:4 in favour of cutting. As expected, forecasts and comments were hawkish (decision ‘finely balanced’, ‘upside risks to outlook’). However, the […]
Henry Occleston
Summary Whether the BoE cuts rates this week is highly uncertain. The fundamental picture suggests they should cut immediately. But recent data volatility could lead to another pause. Updated forecasts could be key (even though med.-term ones will get caveated). If they realign near-term CPI downwards, it will strongly justify a cut. Ultimately, our stronger […]
Henry Occleston
Summary Recent BoE comments have leaned more hawkish. Pill’s speech was most important, though confused in tone. June labour market and inflation data will be key to understanding the underlying trend, despite policymakers insisting single prints will not change the outlook. We think wage and inflation data details suggest the BoE should cut imminently. A […]
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