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GS push forward first BOE hike forecast

BOE
  • Goldman Sachs has pushed forward its initial Bank Rate hike to May 2022 (15bp) "to be followed by subsequent increases of 25bps every two quarters, putting Bank Rate at 0.5% in 2022Q4, 0.75% in 2023Q2 and 1.0% in 2023Q4."
  • They expect reinvestments to cease when Bank Rate reaches 0.5% in Q422 and then "the BoE to begin active asset sales in 2024, after hitting the stated 1.0% threshold at the end of 2023." They expect the BOE to "pause the hiking cycle in 2024 in order to assess the impact of asset sales."
  • Previously GS expected the first (15bp) hike in Q3-23 with a further 25bp in Q1-24 accompanied by balance sheet runoff and then 25bp more in Q3-24 to 0.75%.
  • GS made the change following yesterday's labour market data and note that they "now see scope for greater re-absorption of furloughed workers back into employment after 30 September relative to our previous expectation that around 250k furloughed workers would become unemployed during Q4. As a result, our revised unemployment rate forecast has a sharper decline in Q3 followed by an increase to a peak of around 4.9% in Q4—a less disruptive outcome than we previously expected but an unemployment rate that still peaks slightly above the BoE's modal path in the August MPR"
  • GS also note that the 4-4 split of MPC members who announced they thought the necessary (but not sufficient) criteria for tightening had been set will move to 5-4 as "we believe the newly appointed Chief Economist, Huw Pill, is likely to join the group of internal members thinking the minimum conditions for tightening policy have been met. This news implies an earlier rate increase than we previously thought."
HomepageGoldman Sachs Market NewsBank Of England (BOE) Market NewsBulletUKMarketsFixed Income BulletsForeign Exchange Bullets
HomepageGoldman Sachs Market NewsBank Of England (BOE) Market NewsBulletUKMarketsFixed Income BulletsForeign Exchange Bullets

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