FLGB - Bank of England To Stay Optimistic But Avoid Endorsing June Rate Cut

2024-05-05 01:15:00 ET

Summary

• The Bank of England is inching towards the first rate cut, which we expect in August.
• Expect an optimistic air to Thursday’s meeting but we think the Bank will stop short of rewriting its forward guidance, which would be tantamount to endorsing a June rate cut at a time when the near-term direction of UK inflation is still uncertain.
• Our core 2024 view is that sterling will underperform when it becomes clear that the BoE is ready to move.

By James Smith , Chris Turner & Michiel Tukker

Three scenarios for Thursday's Bank of England meeting

Markets aren't fully buying the BoE's new-found optimism

Can the Bank of England diverge from the Federal Reserve on rate cuts? Bank officials - including Governor Andrew Bailey - have been not-so-subtly hinting that it can. We agree - we expect the first rate cut in August, or maybe even June, and three or four cuts in total this year....

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