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BOE pricing update

SONIA
  • Pricing for the February MPC meeting is back to 45bp after falling to just under 44bp yesterday. There is not much moving around February pricing with a 42-47bp range having remained in place since the December MPC meeting.
  • Equally cumulative pricing for the March meeting has remained fairly anchored to the 75bp level (we are currently at 76bp). In 2023 we have ranged from 72-81bp being priced, with late December having seen up to around 87bp priced.
  • We think that current pricing looks broadly appropriate for February and March meetings.
  • Terminal rate pricing has been the most volatile. We are now pricing in 96bp by August but moved below 93bp yesterday and were as high as 107bp last week following labour market and higher -than-expected core CPI prints. However, this is a long way from the c. 130bp being priced late in 2022.
  • Despite the moves lower, we think in the near-term there are probably two way risks to the terminal rate.
  • Analysts have started to release previews ahead of next week's MPC meeting but a large majority expect a 50bp hike with a terminal rate seen at 4.25% with a small downside skew (we will update this in our BOE Preview, but for the last comprehensive roundup of BOE sellside views see here).
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