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Barclays push back first hike expectation to Feb

BOE
  • "Despite healthy labour market data and possible new inflationary pressures, we believe the more adverse uncertain context created by Omicron will lead the Bank to delay its first hike from December to February. However, we still expect Bank Rate to reach 0.75% in May 2022"
  • Barclays now expects: 15bp hike in February, 25bp in March, 25bp in May ahead of a "prolonged status quo, with risk of rate cuts in 2023."
  • It previously expected 15bp in December, 25bp in February and 25bp in May.
  • "Critical data on the variant's potency may not be available for weeks. Faced with this certain uncertainty, we expect the BoE to delay rate action into next year."
  • "The Alpha and Delta precedents offer limited insight into the possible economic impact of Omicron given the ever-changing reaction functions of households, businesses and governments. We see possible outcomes ranging from a minor drag in Q1 22 offset by stronger growth thereafter to a 4-5% q/q drop in activity if restrictions and public health outcomes are comparable to the 2020/21 winter lockdown."
  • "Despite healthy post-furlough labour market data, MPC members have not shifted decisively more hawkish, casting doubt over a December hike even without the emergence of Omicron."
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