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 […]
Henry Occleston
Summary As we expected, the BoE found comfort in the May inflation outturn’s normalisation in wage-intensive services inflation momentum. Recent strength in services inflation was caveated as partly driven by areas that BoE policy will not affect (index-linked or regulated). Downside risks in inflation were mentioned (albeit with mention also of the risk that higher […]
Henry Occleston
Summary We expect no change in policy at the BoE’s meeting this week, with two voters likely to vote for a cut but the rest to back a pause. Tone could be dictated by the CPI print, which we expect to show inflation ticking back towards MPR forecasts. Our estimate is slightly higher than consensus […]
Henry Occleston
Summary The BoE struck a more dovish tone, with comments suggesting they are strongly considering cutting in June if the data allows. This remains our base case. Bailey strongly indicated that they expect to need to cut more than the market is pricing, but that they will attempt to cut hawkishly (i.e. keep market pricing […]
Henry Occleston
Summary We expect the BoE will leave rates unchanged at next week’s meeting. However, a more dovish inflation forecast should open the door to explicitly discussing cuts. The BoE will ultimately want their first cut to be a hawkish one, and for the market not to price too much subsequent easing – a well telegraphed […]
Henry Occleston
Summary In line with the market, I expect the BoE will leave its bank rate unchanged at 5.25% once again. There is room for a change among external voters. I expect a reduction in votes for hikes; Mann could be the sole backer. Wage and services inflation data has undershot MPR expectations of late. But […]
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