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Breeden's "low inflation (weak demand)" scenario is broadly in line with market pricing

BOE
  • Looking through the Breeden speech - she points to a couple of different scenarios and where Bank Rate would need to go to bring inflation back to target - in her high inflation scenario with second-round effects, Bank Rate would need to peak close to 7% in late-2025.
  • In her low inflation (weak demand) scenario she sets out a scenario which sees Bank Rate only falling back to a bit above 4% by the end of 2025 and 3% by the middle of 2026.
  • She doesn't set out her base case - and her low inflation scenario is broadly in line with market pricing by the end of 2024.
  • So she doesn't endorse market rates, and she basically is implying that market rates would need to see the lowest possible "likely" scenario.
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