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BOE VIEW CHANGE: Barclays push back first BoE cut to June due to recent BoE tone

BOE
  • Barclays pushes back beginning of the BoE cutting cycle expectations from May to June, but continue to expect 8 sequential 25bp cuts with the Bank Rate at 3.25% in May 2025 (previously March 2025).
  • Despite leading indicators pointing to continued disinflation and Barclays continuing "to expect further easing in price dynamics in core services inflation", they are pushing back first cut forecasts to June "based on the balance of tone in recent BoE communications, particularly Chief Economist Huw Pill's speech [at Cardiff University] who we consider to be a good compass for the majority of the MPC". Pill's had said ""in my baseline scenario the time for cutting Bank Rate remains some way off."
  • "By the 9 May meeting, the MPC will not know the April inflation print...By then, we forecast headline, core and core services inflation at 3.2% y/y, 4.2% y/y, and 5.9% y/y, respectively. We think, given the clarified reaction function, that these prints will not constitute compelling evidence to convince the Chief Economist and the majority of the MPC that a cut is due."
  • In addition to BoE communications, Barclays highlight "evidence of a slower disinflation in services in euro area and the US" led them to "revise the beginning of the cutting cycle".
  • On the upcoming budget, "we calculate the updated OBR forecast will afford him [the chancellor] just under £20bn of headroom before policy changes. We expect him to use c.£15bn of that...[and] estimate that neither an NIC cut or an income tax cut of these magnitudes would provide a material change to growth or inflation, nor that they would influence the decision of the MPC on when to begin cutting rates".
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
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MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Credit BulletsHomepagemarkets-real-timeCreditBulletMarketsFixed Income BulletsForeign Exchange Bullets

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