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BofA see 5 more hikes this year (from 2 previously)

BOE
  • Bank of America notes that its "forecast changes are driven primary by the impact of energy prices on inflation and consumer spending power... We expect CPI inflation to average 7.0% in 2022, up 20bp from our forecasts last week"
  • "We assume the government more than doubles the utility bill rebate planned for October from £200 to £500 and cancels the previously planned £40 a year surcharge starting in April 2023... we raise our forecast for public sector borrowing in 2022/23 30bn to £100bn."
  • "Inflation expectations are already running uncomfortably high and what we see as BoE communication missteps recently have in our view undermined their ability to use words to control expectations."
  • Now expect "25bp interest rate hikes in March, May, June, August and November compared to March and May previously. We still expect the BoE to begin active QT in November. We assume the additional economic uncertainty at present would stop the BoE from hiking in 50bp steps."
  • "If the BoE is successful at controlling expectations it will be able to cut interest rates later. So we tentatively factor in a 25bp BoE rate cut in 4Q 2023."
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