BoE Pricing Pulled In Dovish Direction Post-U.S. CPI

The post-U.S. CPI move in U.S rates sees dovish spill over when it comes to UK STIRs.

• That leaves the BoE-dated OIS strip running 1-14bp softer on the day across liquid contracts, with contracts covering the late ’24 MPC meetings seeing the most pronounced moves.
• ~5bp of cumulative tightening is still priced through the February ’24 MPC.
• Further out the first 25bp cut is now more than fully priced through the end of the August ’24 MPC, with a 25bp cut more than 80% priced come the end of the June ’24 MPC (based on current effective levels).
• ~72bp of cumulative easing is priced through ’24.
• BoE dove Dhingra failed to move the market earlier today.
• Note that more recent comments from BoE chief economist Pill noted that although UK inflation is likely to fall, it remains too high. Pill went on to suggest that pay growth levels are not consistent with the Bank’s CPI goal (note that private sector regular pay growth was 0.1ppt below BoE projections in Sep). Furthermore, Pill once again noted that the BoE may not have to move bank rate higher, but remains prepared to do so if required.