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STIR: Dovish BoE Reaction Fades, Just Over 65bp Of Further Cuts Priced For '25

STIR
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The initial dovish move that followed the BoE-decision has faded, with the hawkish caveats, closer inspection of the Bank’s inflation projections and Bailey’s insistence on the gradual and uncertain nature of further reductions in bank rate factoring into the repricing.

  • Much of the hawkish reversal happened ahead of Bailey’s press conference.
  • BoE-dated OIS now prices 66bp of cuts through year-end, with the next 25bp cut fully discounted through May and a follow up 25bp cut priced through August.
  • Year-end pricing is now ~4bp more dovish vs. levels seen ahead of the BoE decision, nearly 8bp off knee-jerk dovish extremes.
  • The market still has a short-term bias to discounting cuts for meetings that are complimented by the MPR releases, which is fair given the elevated uncertainty that Bailey alluded to, along with the extra context that the MPR release can provide.

BoE Meeting

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The initial dovish move that followed the BoE-decision has faded, with the hawkish caveats, closer inspection of the Bank’s inflation projections and Bailey’s insistence on the gradual and uncertain nature of further reductions in bank rate factoring into the repricing.

  • Much of the hawkish reversal happened ahead of Bailey’s press conference.
  • BoE-dated OIS now prices 66bp of cuts through year-end, with the next 25bp cut fully discounted through May and a follow up 25bp cut priced through August.
  • Year-end pricing is now ~4bp more dovish vs. levels seen ahead of the BoE decision, nearly 8bp off knee-jerk dovish extremes.
  • The market still has a short-term bias to discounting cuts for meetings that are complimented by the MPR releases, which is fair given the elevated uncertainty that Bailey alluded to, along with the extra context that the MPR release can provide.

BoE Meeting

Keep reading...Show less