2024-04-13 08:30:00 ET
Summary
- Delays to the first Federal Reserve rate cut, coupled with potential strength in April’s inflation data as service-sector prices are subjected to annual increases, suggest an August rate cut is still slightly more likely than June for the Bank of England.
- Much hinges on the April CPI data due later in May, which is when we’ll see the results of the annual contract-linked price rises that typically take place at the start of the year.
- We think 3% or slightly above is a sensible estimate of the terminal rate, on the assumption that underlying inflation remains higher over this decade than the last.
Markets have taken notice of recent BoE comments
Ever since the mini-budget crisis of summer 2022, investors have generally felt that the Bank of England would be more hawkish than the Federal Reserve and that rates would need to stay higher for longer relative to the US....
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The U.K.'s Summer Rate Cut Hinges On April's Inflation Data