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Goldman Sachs: 1% Bank Rate by May with 25bp hikes every six months after

BOE
  • Expect 25bp February hike with passive QT beginning
  • “We now expect stronger wage growth and inflation, and recent BoE speakers have expressed concerns about the knock-on effects of high inflation. As such, we now expect the BoE to hike in back-to-back meetings through May”
  • “Expect the BoE to announce a fixed and gradual schedule of asset sales to begin in the summer, after hitting the stated 1.0% threshold in May. While highly uncertain, we are expecting asset sales of around £20 billion per quarter”
  • “We expect there to be very limited substitutability between balance sheet policy and rate hikes, consistent with recent comments from Governor Bailey. This suggests further increases in Bank Rate will be required alongside asset sales.”
  • “We look for 25bp hikes every six months over the medium term” with Bank Rate reaching 1.25% in Nov-22, 1.5% in May-23 , 1.75% in Nov-23 and 2.00% in May-24.
  • “It is possible that the MPC decides to hold an additional vote on whether to begin balance sheet run-off following the February meeting. If such a vote were to be held, it is possible that a couple of members vote against an immediate end to reinvestments”
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