**As seen in Risk In The Week report 05/05/24, subscribe at cablefxm.co.uk/reports
While the BoE left the Bank Rate unchanged at 5.25% in March, the central bank dropped a hawkish bias that had been held for some time. Haskel and Mann did not vote for higher interest rates and the MPC was split on the decision to keep policy unchanged. The central bank sees inflation rising 2.75% this year before slowing to 2.5% in 2025, their output projection stands at 0.25% which is slower than HSBC's 0.40% call. More recently, the monthly GDP indicator rose 0.1% in February which was in line with expectations, headline and core inflation slowed to 3.2% Y/y and 4.2%, respectively, both above the consensus median. The upside surprise in the March CPI report is unlikely to move the needle for the BoE as the disinflationary progress remains intact, we will be looking at any comment on wages, the latest metric showed average weekly earnings 3m average at 5.6% Y/y, unchanged from the prior.
The desk at UBS heads into the May policy decision meeting with a focus on a fresh batch of economic forecasts and a potential timing of the BoE's first rate cut. UBS said that data since March moved in line with moderation in wages and inflation, they expect two MPC members to vote for rate cuts in May. UBS pencils BoE's first rate cut to come in August but the recent dovish shift raises risks of a June move, they're calling for 75bps worth of rate cuts this year.
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